[Congressional Record (Bound Edition), Volume 161 (2015), Part 14]
[Senate]
[Pages 19762-19765]
[From the U.S. Government Publishing Office, www.gpo.gov]




              MIDDLE CLASS HEALTH BENEFITS TAX REPEAL ACT

  Mr. HELLER. Mr. President, together we rise to share our concerns 
about the devastating impact of the Cadillac tax enacted as part of 
ObamaCare. As the Presiding Officer knows, I know, and those around the 
country know, the Cadillac tax is a 40-percent excise tax set to take 
effect in 2018 on employer-sponsored health insurance plans.
  My colleagues from across the country have heard the same concerns 
that I have. As both my friend from New Mexico and I have heard, this 
40-percent tax will increase costs, significantly reduce benefits, or 
result in employers getting rid of their employer-sponsored health care 
coverage all together.
  This is precisely why Senator Heinrich and I have offered the Middle 
Class Health Benefits Tax Repeal Act of 2015, the only bipartisan piece 
of legislation that would fully repeal this onerous tax. Our bill has 
22 bipartisan cosponsors. We all agree that this tax should be fully 
repealed because we know it will have a negative effect on hard-
working, tax-paying Americans. This was clearly demonstrated last week 
when the Senate overwhelmingly supported and adopt our amendment to 
fully repeal the Cadillac tax by a vote of 90 to 10.
  Organized labor, the chamber of commerce, local and State 
governments, small businesses, seniors, and, together, 90 percent of 
the Senate--we put forth a solution to fix a problem affecting many 
Americans and their families. It is very rare these days to see this 
much agreement in Washington. Members on both sides of the aisle--
Senator Heinrich and I--came together, listened to what our 
constituents had to say, and sent a mandate to the President to repeal 
this tax. Today we will discuss why fully repealing the 40-percent 
excise tax is so important for middle-class families. Whether it is 
through our legislation, which is S. 2045, the Middle Class Health 
Benefits Tax Repeal Act of 2015, or through other must-pass 
legislation, we hope to address this by the end of the year. Senator 
Heinrich and I will do everything we can within our power to repeal 
this tax.
  I thank the Senator from New Mexico for his leadership in making real 
progress in fully repealing the Cadillac tax a reality, as we are here 
to speak about today. With our vote last week, the Senate sent a clear 
message that we can, and we should, fully repeal this tax. It takes 
both sides of the aisle listening to the American people.
  With that, I ask Senator Heinrich what he has heard from his 
constituents that makes full repeal of the Cadillac tax so important.
  Mr. HEINRICH. Mr. President, I start by thanking my colleague, 
Senator Heller of Nevada, for his partnership and his leadership in 
pushing this issue forward and doing so effectively. I think the 
amendment we saw last week speaks to just how bipartisan this has 
become and how important it is. These days, there truly aren't many 
things around this place where we get a 90-to-10 vote.
  This tax, which will go into effect in 2018, was meant to help pay 
for other parts of the Affordable Care Act by charging a 40-percent tax 
on the highest cost, employer-based health plans. It was supposed to 
target only overly generous health plans--the ``Cadillacs on the health 
care highways,'' so to speak. In practice, however, the tax has become 
more of a ``Ford Focus tax.'' It will impact middle-income families 
who, for reasons that are largely outside their control, have health 
plans that already or soon will reach their policy limits.
  The tax will force many employers to pay steep taxes on their 
employees' health plans and flexible spending accounts. It will 
possibly eliminate some employer-provided health care plans altogether.
  The Cadillac tax has already limited options for New Mexicans to curb 
costs and keep plans affordable. Let me give an example. I recently 
heard from Jamie Wagoner, the benefits and compensation manager for the 
city of Farmington, NM. Under her leadership, the city began 
implementing wellness programs to slow the increase in health 
spending--exactly what we all wanted. Unfortunately, the city recently 
learned that its wellness programs would ultimately be factored in as a 
benefit subject to the Cadillac tax.
  It doesn't make sense that benefits designed to promote health and 
wellness, and ultimately drive down costs, actually end up triggering 
this new tax. This creates an inverted incentive for employers to avoid 
preventive benefits, such as wellness programs, that we all know are 
central to keeping our health care costs under control.
  There are better ways to pay for the good things in the Affordable 
Care Act.

[[Page 19763]]

Doing away with this onerous tax on employees' health coverage before 
it goes into effect will protect important benefits for workers and 
ensure that businesses and families get a fair deal.
  I have always opposed this tax on the middle class, and I worked to 
strip it from the ACA when I was a freshman legislator in the House of 
Representatives. In New Mexico, small business owners, labor unions, 
counties, rural electric co-ops, municipalities--you name it--all 
oppose the tax. When was the last time we had a piece of legislation 
that united all of those constituencies?
  That is why Senator Heller and I introduced the Middle Class Health 
Benefits Tax Repeal Act of 2015 to fully repeal this tax. This 
bipartisan effort also has companion legislation in the House of 
Representatives--legislation that has 178 cosponsors from both sides of 
the aisle. There was a vote on an amendment that Senator Heller offered 
to include a full repeal of the Cadillac tax in the budget 
reconciliation bill, and the amendment was adopted 90 to 10, as my 
colleague pointed out.
  The landmark reforms in the ACA have given thousands of my 
constituents access to affordable, quality health care for the first 
time in their lives. But even the strongest supporters of this law know 
it is not perfect, and there are some parts of it that we absolutely 
need to fix. This is one of them.
  Republicans and Democrats need to put aside the partisan politics, 
put aside the grandstanding, and remember why Congress passed the ACA 
in the first place--to expand access to quality health care for all 
Americans. We need to work together to produce pragmatic policy that 
helps us achieve that goal.
  So I ask my colleague from Nevada specifically how this Cadillac tax, 
as it is called, would impact his residents and constituents in the 
State of Nevada.
  Mr. HELLER. Mr. President, I thank the Senator from New Mexico for 
the question. It is a simple answer. That answer is 1.3 million 
people--1.3 million Nevadans are affected by this Cadillac tax. There 
are 1.3 million workers who have employer-sponsored health insurance 
plans, and they will all get hit by this Cadillac tax.
  Let me tell you what I am talking about. In this case, we are talking 
about public employees across the State. We are talking about service 
industry workers, those who work in Las Vegas on the Strip. They will 
be impacted by this legislation. We are talking small business owners 
across the State of Nevada. They all know they are going to get hit by 
this 40-percent excise tax. Not to be left out, of course, are the 
retirees, the seniors in the State of Nevada that will also be affected 
by this particular tax.
  We are talking about three things: reducing benefits, increasing 
premiums, and also higher deductibles. Let me repeat the three things 
that this excise tax does: It reduces benefits, increases premiums, and 
raises deductibles. These are three things that none of us want to see, 
not in this Chamber. All these lead to more money being taken out of 
the pockets of taxpayers and hard-working families.
  For those who supported this law, this tax was intended to go after 
high-cost plans provided to the very wealthiest Americans. Clearly, we 
see in this colloquy back and forth that is not the case. This is going 
to hurt every middle-class, hard-working, tax-paying American.
  We know this tax is hard hitting, and it will affect the middle 
class. For that purpose, the Senator from New Mexico and I have brought 
this legislation to this floor. Again, we will repeat, it was a 90-to-
10 vote--something we don't see very often in this Chamber. I believe 
that kind of a vote is a message for every American.
  I said on the floor recently when we were having this debate that 
nobody in America supports this; nobody in America supports a 40-
percent excise tax on their health care benefits. Nobody does. There 
may be a few here in Washington, DC, but when you get outside of 
Washington, DC, nobody supports it. That is why we are having this 
discussion today, so we can inform not only Nevadans, not only New 
Mexicans but our colleagues here in this Chamber how important and how 
onerous this is.
  Having said that, maybe we can get more information on what the 
Cadillac tax really does, and we will hear the answer to that question 
from Senator Heinrich.
  Mr. HEINRICH. I thank my colleague.
  Mr. President, the whole policy objective of the Cadillac tax was 
supposed to cap excessive spending as a way to reduce health care 
spending and to generate revenue for other parts of the ACA. Obviously, 
the popular name of the tax implies that it is only going to hit a few 
individuals with gold-plated health insurance plans. When this was 
proposed and included in the ACA, people cited Goldman Sachs' executive 
health benefits plans as sort of the poster child for the Cadillac 
plan. Obviously, they chose very wisely in the way that they branded 
this. But this tax targets many plans that aren't gold plated; they are 
barely bronze plated. It solidly taxes middle-class workers.
  Proponents of the Cadillac tax are operating under the clearly flawed 
premise that plans with overly generous benefits are the primary 
drivers of increased health insurance programs, and we know today that 
is not the case. The data doesn't back it up.
  According to a 2014 report, the richness of plan benefits accounts 
only for about 6 percent of the overall increases in a plan's premium 
growth. The costs of employer health plans are actually driven by 
factors that are largely out of the control of the actual beneficiary--
things like the group's size, the health status of the firm's 
employees, or the age band for those employees. Geography alone 
accounts for 69.3 percent of a plan's premium growth, which obviously 
would be completely unaffected.
  It is clear that the Cadillac tax will hurt millions of workers, 
their families, retirees--all with health plans of modest value. This 
includes low- and moderate-income families, people on fixed incomes 
because they are retirees, public sector employees, small businesses, 
the self-employed, including three-quarters of a million New Mexicans. 
Let me put that in perspective: There are only 2 million of us.
  I ask Senator Heller, my colleague from the Silver State: What are 
employers in the State of Nevada expecting will happen when the 
Cadillac tax goes into effect if we aren't able to pass this 
legislation?
  Mr. HELLER. Mr. President, to answer the question of the Senator from 
New Mexico: As he just mentioned, three-quarters of a million New 
Mexicans will be affected by this legislation. As I said earlier, 1.3 
million Nevadans will be affected. I think we have 3 million, so 
roughly half of Nevadans are going to be affected by this excise tax--a 
40-percent excise tax.
  Fortunately, through Senator Heinrich's hard work and our efforts 
here on this floor, again, I repeat, we passed this legislation 90 to 
10. I think it bears heavily on the hard work my friend from New Mexico 
did to get this in front of this Chamber.
  As we can imagine, if 1.3 million Nevadans are affected by this, you 
will hear from all of them. You do. You hear from all of them. I have 
heard from large companies, I have heard from small businesses, and I 
have heard from health care employees such as hospitals and the 
American Cancer Society. Organized labor in Nevada has contacted my 
office, as have senior citizens throughout my State. They are all 
saying the same thing. They are saying: The Cadillac tax needs to be 
fully repealed or our employees will experience massive changes to 
their health care. I think that bears repeating. The Cadillac tax needs 
to be fully repealed or our employees will experience massive changes 
to their health care.
  Large employers who negotiate multiyear contracts are seeing this tax 
come up quickly for 2018. Yes, this tax goes into effect in the year 
2018. As my friend from New Mexico and I know, they are negotiating 
these contracts today. For 2018, they are negotiating contracts for 
large companies, labor organizations, and even public employees--today 
for 2018. That is why it is so

[[Page 19764]]

important at this moment. They are planning and negotiating with 
employers now for how this tax will impact their employees' benefits 
within the next 2 years.
  I was talking with D. Taylor from the Culinary Union, a prominent 
organized labor group in my home State of Nevada, as well as in New 
York City and California. D. told me that if Congress doesn't repeal 
the Cadillac tax, culinary employees will see massive changes to their 
health care plans.
  In a letter he sent me in September, urging Republicans and Democrats 
to work together on this issue--which we are--he called the 40-percent 
excise tax a ``dark cloud . . . that has already started to impact 
negotiations and shift costs to [their] members.'' That is what it is 
doing to the Culinary Union in Nevada. It is a dark cloud, according to 
D. Taylor, and it is already impacting negotiations, shifting costs 
over to the employers.
  To make matters worse, the chief financial officer of a waste 
recycling company, Action Environmental, recently told the Wall Street 
Journal that his company would consider getting rid of its employee 
coverage altogether because of ObamaCare's Cadillac tax.
  Mr. SASSE. Mr. President, will the Senator yield for a question at 
some point?
  Mr. HELLER. Certainly.
  Mr. SASSE. It doesn't need to be now.
  Mr. HELLER. Let me finish this.
  He said: ``I'd be lying if I said we haven't had that discussion.'' 
Again, this goes back to the chief financial officer of a waste and 
recycling company.
  Delta Airlines expects ObamaCare will cost it $100 million per year. 
Imagine that, one company--Delta Airlines--and the ACA will cost them 
$100 million per year. One reason for new costs is the 40-percent 
excise tax on Delta's employee health benefits.
  As if Americans don't have enough trouble as it is with issues with 
airlines these days, just add a 40-percent excise tax. Some have 
identified the Cadillac tax as a tax that just hits unions or a tax 
that just hits wealthy Americans, but the Cadillac tax is a tax on the 
middle class. I think we know that. I think we understand that. That is 
why we saw the vote we did last week. It is a tax on small businesses, 
it is a tax on the middle class, and it is a tax on retirees.
  With that, I know we have a question from my friend from Nebraska. I 
wish to give him an opportunity to raise that question.
  Mr. SASSE. Thank you, sir, and the Senator from New Mexico. Thank you 
for letting me get in.
  I know we don't have a lot of genuine open debates around here, so I 
want to be honest. This is a little bit awkward to delicately step onto 
the floor.
  I was listening to the debate. I wasn't planning to speak, but I 
thought I would ask the question. I think the pay-fors in ObamaCare are 
problematic across the board. I am not a particular defender of any of 
these pay-fors, but I would ask sincerely, Why would you two be 
interested in prioritizing changing the tax deductibility or the limits 
for people who already have tax-protected insurance, but we are not 
talking about any sort of tax break for the small business people who 
have none?
  The simple fact is we have the particular problems we have in America 
in health care because of wage and price controls at the end of World 
War II, where if an employee could get an extra dollar of wages, they 
would clearly be taxed, but if they got an extra dollar of benefits 
through their large employer group, that would be tax-free. That is 
limitless, but that tax benefit only applies to people who are in large 
groups. If you are in a small business, you don't get any 
deductibility.
  I am not disagreeing with the specific policy you are advocating, but 
I would ask why would we prioritize this policy when there is no 
conversation happening on the floor for all the small business men and 
women in America, the farmers and ranchers who get absolutely zero tax 
protection? I am trying to understand the prioritization.
  Mr. HEINRICH. I want to first welcome our colleague from Nebraska to 
this conversation. I am sure he has heard a lot about this from his 
constituents as well. I think the reason the timing of this is so 
critical is because we see the impacts of this coming at the moment. We 
still have enough time to do something about it, but we are already 
seeing the impacts on people who are negotiating contracts now, the 
impacts of business plans for this.
  I think the Senator from Nebraska raises a valid question in that we 
have a certain incentive built into the current system by virtue of 
having large health care plans, employer-based plans not be taxed. I 
actually think it points a way to a more reasonable and elegant way to 
potentially pay for things in the ACA that some of us value, but that 
doesn't mean we shouldn't also have that conversation about individual 
plans and small business and farm and ranch plans because obviously 
those are people who have a very hard time attaching themselves to 
these large pools.
  Mr. SASSE. I thank the Senator. I think we all know we need to do 
genuine health care reform sometime soon in the future because the 
reality is, the No. 1 driver of uninsurance in America is not 
preexisting medical conditions, although we all should empathize with 
the 4 million of the 320 million of us in America who have uninsurable 
preexisting medical conditions, but we are dealing with something on 
the order of 70 to 80 million Americans in a given calendar year who 
pass through a period of uninsurance, and the vast majority of them are 
uninsured because of our insurance pooling arrangements that are still 
an artifact of the 1940s and 1950s, where people had one job for 
decades at a time.
  When I was a college president, until a year ago coming to join you 
all here, and I would shake kids' hands at graduation when they walked 
across the stage, they were not going to just change jobs, they were 
going to change industries three times in their first decade 
postcollege. The No. 1 driver of uninsurance in America is job change. 
These kinds of policies that we are debating on the floor today make it 
harder to create portable health insurance plans that go with people 
across job and geographic change, which is actually what is driving the 
uninsurance in America.
  I thank the Senator for allowing me to sneak in for a minute. I am a 
rookie learning my way around here, but I was on the floor listening to 
your debate. Thank you for the opportunity.
  Mr. HELLER. Mr. President, I thank the Senator from Nebraska for his 
input. He is right. There is a broader discussion that has to be had. 
The Senator from New Mexico and myself are trying to hit on an issue 
that we feel is vitally important going forward as this new excise tax 
hits the American people in 2018.
  To the Senator from Nebraska, I have no doubt that there is a much 
broader discussion that needs to be discussed on health care. In fact, 
this discussion the Senator from New Mexico and I are having isn't on 
the Affordable Care Act at this point. We are not discussing the 
Affordable Care Act. We are talking about a principle within it--a tax 
increase that we believe is onerous and important today. What you are 
saying is important. Don't get me wrong. It ought to be discussed. We 
have to find a venue to have that discussion. Thank you very much for 
your involvement.
  I want to ask the Senator from New Mexico how this 40-percent excise 
tax would affect workers in New Mexico.
  Mr. HEINRICH. According to one source, the Kaiser Family Foundation, 
one in four employers that offer health care benefits will be affected 
by the Cadillac tax in 2018 if their plans remain unchanged. Despite 
the fact that the tax doesn't go into effect until then, many employers 
have already begun scaling back their coverage to avoid that. Despite 
the fact that the tax itself is set to go into effect in 2018, we are 
already seeing the impacts to small businesses, to economies now.
  As employers consider ways to lower the costs of their health care 
plans, many are shifting costs to their employees. Increased 
deductibles, copays, out-of-pocket maximums, higher copayments and 
deductibles leave many,

[[Page 19765]]

especially low- and middle-income workers, underinsured, who are 
exactly the folks who were not supposed to be touched by the Cadillac 
tax. These are definitely people in my State who are not driving 
Cadillacs. I can assure you of that.
  According to a study by the American College of Emergency Physicians, 
higher out-of-pocket costs result in delayed medical care as many forgo 
essential care when they get sick and become less likely to fill their 
prescriptions or stick to their doctors' treatment plans, and those 
with higher out-of-pocket costs are also more likely to seek medical 
treatment in emergency rooms--the most expensive way to get health care 
treatment. This is precisely what we were trying to avoid with the 
advent of the Affordable Care Act.
  I want to ask my colleague from Nevada, in particular, you mentioned 
a number of different constituencies whom you have heard from about 
this tax--people such as the culinary workers. Are they upper class, 
Cadillac-driving constituents or are they middle-class folks who are 
just trying to put food on the table and maybe send their kids to 
college someday? Who is going to be impacted by this?
  Mr. HELLER. I thank the Senator from New Mexico. I want to go to the 
same report. I think it clarifies his point and the question he just 
asked me.
  Again, as he mentioned, 1.3 million Nevadans are going to be affected 
by this 40-percent excise tax. Three-quarters of a million New Mexicans 
are going to be affected by this excise tax. So I have hard time 
believing that most of them are wealthy enough to have to pay and for 
their employers to have to pay this kind of tax.
  Let's go back to the Kaiser Family Foundation--a report that you 
quoted from. I have a number of statistics. I think it will better 
clarify. There is a quote in here that I want to emphasize that answers 
the point and the question you brought out. According to the Kaiser 
Family Foundation, employees who have job-based insurance have 
witnessed their out-of-pocket expenses climb from $900 in 2010 to 
$1,300 in 2015. That is an average. That is on average a 50-percent 
increase in their health care costs in the last 5 years. Employees 
working for small businesses now have deductibles over $1,800 on 
average. Kaiser also noted that the deductibles have risen nearly seven 
times faster than workers' earnings since 2010.
  If you are the average middle-class family, with an average income, 
can you imagine your deductibles rising seven times faster than your 
earnings have since 2010? Here is the quote from Kaiser's president, 
Drew Altman, that really answers your question:

       It's quite a revolution. When deductibles are rising seven 
     times faster than wages . . . it means that people can't pay 
     their rent . . . they can't buy their gasoline. They can't 
     eat.

  If that doesn't answer the question of who is getting affected by 
this--they are individuals who go month to month, week to week, day to 
day on their wages. When you have deductibles rising seven times faster 
than your earnings, you get to a point, as Mr. Altman said, that you 
can't pay your rent, you can't pay your gas, and you can't afford to 
eat.
  As deductibles rise, another way employers are planning on avoiding a 
massive new tax is by eliminating their popular health savings 
accounts--HSAs--and FSAs. Over 33 million Americans who have FSAs and 
13.5 million Americans who are using HSAs may see these accounts vanish 
in the coming years as companies scramble to avoid this 40-percent 
excise tax. HSAs and FSAs are used for things such as hospital and 
maternity services. HSAs and FSAs are used for things such as childcare 
and dental care, physical therapy, and access to mental health 
services. Access to these lifesaving services could all be gone for 
tens of millions of Americans if the Cadillac tax is not fully 
repealed. Deductibles are rising, premiums are rising, and services are 
being cut.
  Today we have talked a lot about how employers are making major 
changes to their workers' health care in order to avoid this tax. If 
employers--whether it is a union or private company--are changing their 
employees' health care benefits to avoid the Cadillac tax, this tax is 
not going to generate the kind of revenue the Congressional Budget 
Office originally anticipated.
  To that question directly, I ask Senator Heinrich, are CBO's cost 
assumptions accurate?
  Mr. HEINRICH. I thank the Senator for the question because I think 
this is incredibly important. The CBO estimated that the ACA would 
generate $93 billion over 10 years with this tax, but when you drill 
down on that, only one-quarter of that--about $23 billion--actually 
comes from excise tax receipts themselves. The remaining three-quarters 
comes from revenue that would be theoretically generated from increases 
in taxable wages that some economists expected would be coupled with 
reductions in health care benefits. In other words, all the money you 
are saving, you are going to pass on to the employees in the form of a 
raise. We simply know that is not what happens in the real world. In 
fact, employer surveys over the past few years have conclusively 
pointed to one unifying fact, that at best employers will not raise 
wages for their workers to compensate for downgrading of employee 
health insurance benefits.
  In fact, a recent American Health Policy Institute study found that 
three-quarters of employers said that they would not raise wages in 
order to make up for less comprehensive health insurance plans.
  I say to Senator Heller, I know we are being joined by the leader 
here, and I am going to have to run to another event in a few minutes, 
but I want to ask you if you would maybe consider a quick wrapup. I 
want to make the point that I think we have gotten as far as we have 
with this effort because of the incredible leadership you have shown, 
because of the bipartisan nature of this effort, because it is simply 
common sense that we need to make sure people have easier access to 
affordable care, and that the Cadillac tax may have sounded good at the 
time, but we are clearly learning today that this is a Ford Focus tax 
that will hit your middle-class families, my middle-class working 
families, and it is something we ought to be able to agree should be 
repealed.
  Mr. HELLER. Mr. President, I want to wrap this up. I know the leader 
is here, and I want to give him ample time.
  I thank the Senator from New Mexico for his comments and for his help 
and support on this legislation moving forward. I appreciate all the 
work to get this bipartisan bill to the finish line, and I know we will 
continue to work together to repeal this bad tax. Once again, whether 
it is my bipartisan bill, our bipartisan bill, this Chamber's 
bipartisan bill or a year-end package like tax extenders, we need to 
repeal this bad tax. Fully repealing the Cadillac tax is an opportunity 
for Republicans and Democrats to work together and join forces to 
appeal a bad tax for one purpose, and that is to help 151 million 
workers keep the health insurance they love.
  Mr. President, I yield the floor.

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