Reid, Pelosi pushing for repeal of ObamaCare’s ‘Cadillac tax’

Senate Minority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) are working behind the scenes to repeal one of the most controversial taxes in ObamaCare, multiple sources tell The Hill.

Reid and Pelosi have been talking since the spring with President Obama about repealing the “Cadillac tax” on employer healthcare benefits, a senior Democratic aide confirmed on Friday.

“Point is, they both want to get this done,” the Democratic aide said.

{mosads}Opponents of the 40 percent excise tax on high-cost health plans believe 2015 is their last, best chance to get the provision repealed before presidential politics grind the legislative process to a halt.

With just two months left in the year, sources say the most ideal option for Democrats is attaching repeal to the package known as tax extenders. The cost of the extenders bill is typically not offset, making it an attractive vehicle for ending one of ObamaCare’s biggest revenue generators.

Reid and Pelosi have not settled on a plan and are leaving their options open, the aide said, adding that the work on ending the tax could carry over into next year.

“It is clearly a commitment for the Democratic leadership,” AFL-CIO lobbyist Tom Leibfried said in an interview in his downtown office Friday. “We think there’s a real chance to get this done, as big a lift as this is.”

The Democratic leaders are seeking to end the tax at a time when all of the party’s major presidential candidates — including front-runner Hillary Clinton — have pledged to repeal the tax before it goes into effect in 2018.

Both Reid and Pelosi have remained relatively quiet on the tax since the bill’s passage in 2010. Even as dozens of Democrats signed onto bills in their respective chambers to repeal it, Reid and Pelosi stayed in the background, refraining from public statements on the efforts. 

Powerful labor groups such as the AFL-CIO and the American Federation of Teachers vehemently opposed the Cadillac tax from the start. They say repeal needs to happen soon, before employers begin trimming back healthcare benefits.

Aside from the question of how to pay for repeal, the Democrats’ biggest roadblock is the Obama administration.

The tax on high-cost insurance plans is at the heart of Obama’s strategy to contain costs across the marketplace. Health officials and economists close to the law are dead set against abandoning the tax, which they argue should nudge employers and employees toward cheaper insurance plans with less waste.

Last month, Obama’s top economic adviser, Jason Furman, called the tax “perhaps the single biggest leverage we have on health costs in the private sector.”

“That’s very disappointing and frustrating for us, but at some point, [the administration] can count too, and they can see that we have over a majority in the House in one form or another,” Rep. Joe Courtney (D-Conn.), the sponsor of a Cadillac tax repeal bill, said of Obama’s opposition in an interview last month.

The Democratic leadership push first got off the ground this spring, with the two leaders later raising the issue in person with Obama during a September meeting, Leibfried said. Both Reid and Pelosi have driven the effort equally, the aide said.

The biggest hurdle for getting rid of the tax is figuring out how to replace the $87 billion in government revenue for the Affordable Care Act (ACA).

Leibfried said there are several options on the table, including an offset package that House leaders decided not to use when crafting the so-called “doc fix” legislation earlier this year. The cost of the final bill was only partially offset.

To get Republicans to the table, Leibfried said Reid and Pelosi might have to agree to the repeal of the medical device tax — another unpopular funding mechanism for the healthcare law that many Democrats oppose.

While Republicans are also on the record opposing the Cadillac tax, it is Democrats who are increasingly taking the lead on repeal, in part due to intense pressure from allies in the labor movement.

“Even if you have some prominent folks and a large number of Republicans on a bill, any adjustment to the ACA is still incredibly loaded,” Leibfried said.

Behind the scenes, Republican leaders are also feeling pressure to repeal the tax — or at least not to stand in the Democrats’ way, Leibfried said. He said lobbyists for the AFL-CIO have been working closely with some of the country’s biggest employers, who are also working the Republican side vigorously.

“Members of Congress are understanding that this isn’t a 2018 issue. This is something that needs to be dealt with much sooner,” added Shaun O’Brien, the AFL-CIO’s assistant health and retirement policy director. “People are beginning to feel the pain now.”