How one benefits exec is fighting the Cadillac tax
Jody Dietel, chief compliance officer at WageWorks, elicited gasps from the audience at the EBN Benefits Forum & Expo in Nashville last week when, during a panel on HSAs, she briefly mentioned her efforts to repeal the Cadillac tax.
The tax, the effects of which have been delayed until 2020, is wildly unpopular among employers and unions. Health plans worth more than $10,200 for individual coverage and $27,500 for family coverage will be taxed by 40% as a means to scale back on high-cost health-benefit plans.
“If you haven’t engaged on that issue, you really need to,” Dietel said. “It is a scary thing if you have not been walked through it.”
Dietel spoke to Employee Benefit News about the tax and how she is working in Washington to curb or repeal it.
Employee Benefit News: How does the Cadillac tax work?
Jody Dietel: Part of the Affordable Care Act, [in fact] one of the largest sources of revenue for it, is this taxing of overly generous employer-provided coverage. The idea is that right now we receive our wages and we’re taxed on them, but we’re not taxed on any benefits that we get. So there’s sort of a general decision — on both sides of the aisle — that there probably should be some limitation. But the way the Affordable Care Act did it is they swept in everything, including employee contributions to flexible spending accounts and health savings arrangements.
EBN: Why isn’t it feasible to implement the tax?
Dietel: The way that it’s structured today isn’t workable, really. It’s never going to raise the $80 billion that they still think it’s going to raise, because there are flaws in the scoring. There’s a feeling that as employers reduce coverage, they’re going to give everyone a raise for that reduction in coverage, but that’s never been proven. It’s an economic theory, and it probably isn’t going to happen on a one-to-one basis. Especially right now, there’s concern about out-of-pocket expenses, there’s concern about growing deductibles – people are avoiding care because they can't afford it. They need these safety nets of health FSAs and HSAs. Furthermore, on the public exchange, we give families up to 400% of poverty limit co-pay support and premium support. That’s the average income, at least in our book, of business at WageWorks of an FSA or HSA account holder; average household income is just under $58,000, whereas 400% of the poverty limit is north of $105,000. My feeling is why are you removing the ability for these employees to have a safety net for out-of-pocket expenses? On the public exchange, if they were the same people and they could get their coverage there, they would be getting co-pay support.
EBN: How are you fighting to repeal the Cadillac tax?
Dietel: We are spending a lot of time meeting with offices in both the House and the Senate. There is bipartisan support. There’s never been an office that says, “No, I love the Cadillac tax, and it’s perfect the way it is.” They all think it needs to change and needs to be fixed. I think it would have happened last year, except the White House said, “No way.” They want it left in place. We’re hopeful either that there might be some slim opportunity during the lame duck or maybe in the first 100 days — both Secretary Clinton and Mr. Trump have come out against the Cadillac tax, so under either administration we think there will be movement on it.
EBN: What’s the most important thing you want people to know?
Dietel: I think the goal that we have right now is just making sure that we communicate the problematic areas of the Cadillac tax to members of Congress who just aren’t aware of it.
This interview has been edited and condensed.