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07.15.19

Twenty-three FWA Unions Call on Congress to Repeal Cadillac Tax

FEDERAL WORKERS ALLIANCE
COLLECTIVELY REPRESENTING OVER 300,000 FEDERAL WORKERS



July 15, 2019

Dear Representative:

On behalf of the Federal Workers Alliance (FWA), representing upwards of 300,000 federal workers from all across the federal government, we write to urge you to vote yes on the House floor to approve H.R. 748, the “Middle Class Health Benefits Tax Repeal Act”. This important bipartisan pro-worker legislation permanently repeals the 40 percent tax on high-cost employer-sponsored health care benefits – set to take effect in 2022 – that millions of working and retired Americans depend on. We want to protect the health benefits in our Federal Employees Health Benefits (FEHB) program and oppose the 40% tax because it would tend to weaken these benefits and increase our health costs.

Since the 40 percent excise tax was enacted in 2010 as part of the Patient Protection & Affordable Care Act (ACA), out of pocket health care costs have continued to increase significantly faster than workers’ wages. At the bargaining table, workers in all sectors of the economy are accepting lower or no pay increases, and cuts to other important benefits in exchange for an employer-provided health benefit that is both affordable and meets the health needs of their families. If this tax is not repealed, tens of millions of workers and retirees will see the gains from these tradeoffs fall by the wayside, while the underlying issues driving up health care costs will go unaddressed.

Analysis by the Congressional Research Service and the Congressional Budget Office shows that the costs of this tax will be passed onto workers in the form of reduced benefits, loss of coverage options, and/or increased taxes. Even though the excise tax has not taken effect yet, it has already reduced the benefits and quality of employer-sponsored health insurance benefits. Employers themselves admit that they have little appetite for providing health care benefits that would trigger the 40% tax. In anticipation of the original 2018 effective date of the excise tax, the American Health Policy Institute reported in 2015 that “Almost 90 percent of large employers are taking steps to try to prevent their company from having a plan that triggers the excise tax.” In our federal sector, the Office of Personnel Management’s (OPM) carrier guidance to health insurance providers in the Federal Employees Health Benefits Program (FEHB) tells insurance carriers that, “To remain competitive, it is imperative for Plans to avoid this additional cost,” and “FEHB carriers should continue with development of respective contingency plans in preparation for the excise tax” (see FEHB Program Carrier Letter No. 2018-01).

If the 40% excise tax is allowed to take effect, it will further burden working families without addressing the key factors that continue to drive up health care costs. The three largest categories of health care costs are end of life care, emergency room visits, and chronic conditions. The 40% tax does little to address or reduce health costs resulting from these situations. As it stands, the 40% excise tax will go into effect in 2022 on plans with overall annual costs exceeding estimated thresholds of $11,100 for individual coverage and $30,100 for coverage of more than one person. Given these tax thresholds will be chained to an inflation rate that is historically significantly below medical inflation rates, over time the tax will afflict millions and millions more additional families.

By and large, plans that will be subject to the excise tax have high costs not due to generous benefits, but because of other cost drivers, including demographics (e.g. older workers or female dominated occupations), geographic disparities (e.g. areas with high medical costs), lack of market competition, and risk pool size.

H.R. 748 has broad support from many varied affected stakeholders, including unions, public and private sector employers, health advocacy organizations, and health insurance providers. Today, an overwhelming bipartisan majority in the House recognizes that the 40% excise tax will result in reduced health benefits and coverage options, increased health care copays and coinsurance, higher deductibles, and hurt employers trying to provide competitive benefits to employees, while failing to address the real cost drivers in the health care system.

The FWA urges you to vote yes to approve H.R. 748 and thereby provide permanent relief from the 40% tax to working families and retirees.

If you have any questions, contact FWA legislative co-chairs Matt Biggs at (202) 239-4880 or Steve Lenkart at (202) 216-4458.

Sincerely,

American Federation of State, County, and Municipal Employees (AFSCME)
American Federation of Teachers, AFL-CIO (AFT)
Federal Education Association/National Education Association (FEA/NEA)
International Association of Fire Fighters (IAFF)
International Association of Machinists and Aerospace Workers (IAMAW)
International Brotherhood of Electrical Workers (IBEW)
International Brotherhood of Teamsters (IBT)
International Federation of Professional and Technical Engineers (IFPTE)
International Organization of Masters, Mates and Pilots (MM&P)
Marine Engineers’ Beneficial Association (MEBA)
Metal Trades Department, AFL-CIO (MTD)
National Association of Government Employees, SEIU (NAGE)
National Education Association (NEA)
National Federation of Federal Employees (NFFE)
National Weather Service Employees Organization (NWSEO)
Overseas Federation of Teachers, AFT, AFL-CIO
Professional Aviation Safety Specialists (PASS)
Patent Office Professional Association (POPA)
Seafarers International Union/NMU (SIU)
Service Employees International Union (SEIU)
Sheet Metal, Air, Rail and Transportation Workers (SMART)
SPORT Air Traffic Controllers Organization (SATCO)
United Power Trades Organization (UPTO)

FWA Letter to Congress to Repeal Cadillac Tax

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