The Alliance has joined a coalition to “Fight the 40” – a diverse, national consortium of employers, health plans and union groups organized by The American Benefits Council which aims to repeal the 40 percent excise tax slated to take effect in 2018.

In theory, the excise tax, or Cadillac tax, as it is also known, is intended to reign in health care spending by curbing excessively rich benefit plans. The argument is that generous plan designs, where consumers have little or no out of pocket expenses, can lead to overuse of health care services. Efforts to reduce overuse would ordinarily receive our support as unnecessary health care interventions expose patients to harm while driving up health care costs. However, the Excise Tax is different.

It won’t just impact Cadillacs.

Today, many plans may be safely below the initial thresholds of $10,200 for individual and $27,500 for family plans. However these thresholds will be increased at the rate of the Consumer Price Index for Urban Consumers (CPI-U), while actual health care costs increase at a much faster rate. According to the Bureau of Labor Statistics, the average CPI-U trend from 2010 – 2014 was 2 percent, compared to medical services inflation of 3.2 percent. It won’t take long for the trend lines to cross, causing many/most employer health plans to be subject to the 40 percent tax on costs that exceed these thresholds.

It punishes the wrong things.

As currently designed, costs associated with wellness programs and all but the most basic first-aid type onsite clinic services count toward the Excise Tax threshold. Yet, these innovations are consistent with the stated goal of controlling costs while improving employee health.

We are in good company. Early participants in the Fight the 40 include AT&T, Chrysler, Intel, UPS and current Alliance member John Deere. As the work of the Fight the 40 coalition progresses, we will share opportunities for our members to get involved.

More Information about the Fight the 40

The American Benefits Council announced on July 28 the launch of The Alliance to Fight the 40. The Alliance Board of Directors recently voted to join this effort to repeal the 40 percent excise tax on employers slated to take effect in 2018.

The Alliance to Fight the 40 is a coalition of public and private sector employer organizations, labor unions, health care companies and two Members of Congress who have authored legislation to repeal the tax: Rep. Frank Guinta (R-HN) and Rep. Joe Courtney (D-CT).

The coalition is seeking to repeal the 40 percent tax on employee health benefits to ensure that employer-sponsored coverage remains effective and affordable for working Americans and families. The Affordable Care Act requires that the nondeductible 40 percent excise tax be imposed on employer-sponsored coverage that exceeds certain thresholds ($10,200 for self-only, $27,500 for family).

The media has raised many questions about the $87 billion revenue the Congressional Budget Office (CBO) estimates the provision will raise over the next 10 years. Both Rep. Courtney and Rep. Guinta, as well as The Alliance to Fight the 40 members took issue with that estimate, noting its flawed premise that three quarters of the revenue is projected to be raised by employers reducing health benefits and then “making it up to workers” in the form of higher, taxable, wages.

The Alliance to Fight the 40 has received extensive media coverage, including stories in the New York Times, Modern Healthcare, The Hill, Politico, American Public Media’s Marketplace, and a reference (without specifically mentioning The Alliance to Fight the 40 by name) in the Washington Post to a “high-powered new lobbying alliance.”

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Cheryl DeMars

Cheryl DeMars

President & CEO, The Alliance

Cheryl DeMars joined The Alliance in 1992, assuming several roles before becoming CEO in December 2006. Cheryl works with the Board of Directors and senior leadership team to establish the strategic direction of the cooperative. 
Cheryl participates in a number of national and regional initiatives that align with The Alliance’s mission of controlling costs, improving quality and engaging individuals in their health. She serves on the Advisory Board of the Wisconsin Population Health Institute and the board of the Wisconsin Collaborative for Healthcare Quality. 
Prior to joining The Alliance, Cheryl was a program manager at Meriter Hospital in Madison. She earned a master’s degree in social work from the University of Wisconsin-Madison. 

Read more blog posts by Cheryl