A national association representing large employers submitted a letter of support Friday for a new bill that would repeal the Affordable Care Act’s controversial Cadillac tax.

The ERISA Industry Committee (ERIC) — a national association that advocates for large employers on health, retirement and compensation public policies — said it applauded the “Middle Class Health Benefits Tax Repeal Act of 2017,” and the efforts of Sen. Dean Heller (R-Nev.), Sen. Martin Heinrich (D-N.M.), Rep. Mike Kelly (R-Pa.) and Rep. Joe Courtney (D-Conn.) for working to eliminate the 40% excise tax on health benefits imposed by the ACA.

[Image credit: Bloomberg]
[Image credit: Bloomberg]

“Employers have had a lot of trepidation about efforts to change the tax treatment of employer-sponsored health benefits,” says James Gelfand, ERIC’s senior vice president of health policy. “Most of the costs of health insurance are outside the control of the benefits sponsor.”

The tax targets health plans worth more than $10,200 for individual coverage and $27,500 for family coverage as a means to scale back on high-cost health-benefit plans.

Janet Trautwein, CEO of the National Association of Health Underwriters explains when the law it was created, it was marketed as a tax on richest benefit plans.

“But that is not the case,” she says. “Not only does it not actually identify plans with Cadillac type benefits, but it’s structured in such a way that many employers, from the smallest employer to the largest corporation, may have to reconsider their ability to offer coverage to employees at all.”

“We look forward to working with members of Congress on this important bipartisan effort to repeal this inequitable tax and protect employer-sponsored health coverage,” she adds.

Charles Symington, senior vice president for external and government affairs at The Independent Insurance Agents and Brokers of America, says his group is “greatly concerned” about the excise tax.

"This harmful tax will not only hit many of our small business members and their clients starting in 2020, but over time will impact more and more individuals because the tax threshold is tied to a very slow measure of inflation,” Symington says. “This snowball effect will do irreparable damage to the employee benefits marketplace. It is imperative that Congress protect the employer sponsored healthcare system for the 175 million Americans that depend on it.”

Gelfand, who wrote the letter on behalf of the committee, says the tax on health insurance is based on cost rather than generosity. The misconception, he says, is that CEOs and other high-ranking employees are getting the best care and paying nothing for it.

“That’s not really what we’re talking about,” he says.

Rather, ERIC argued in its statement that “taxing employer-sponsored health insurance benefits would inevitably lead to worse health insurance for those who are offered plans, and [also would lead to] more employers declining to offer health benefits.”

“ERIC is committed to repealing the Cadillac tax not only because of the crushing financial burden it would place on employers and employees, but also because compliance with the tax would be a time-consuming and expensive administrative burden,” the letter read.

ERIC isn’t the only group to come forward in support of repeal of the Cadillac tax.

Republicans and Democrats in Congress support the new bill, an updated version of the “Courtney-sponsored Middle Class Health Benefits Tax Repeal Act of 2015” that asks the IRS to repeal the excise tax. Unions and employers also support its repeal, as does President-elect Donald Trump.

The tax is currently delayed until 2020.

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