Letter on ACA's 40 Percent Excise Tax on Health Care Benefits | Business Roundtable

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The Honorable Orrin Hatch
Chairman 
Committee on Finance
United States Senate
Washington, DC 20510
 
The Honorable Ron Wyden
Ranking Member
Committee on Finance
United States Senate
Washington, DC 20510
 
The Honorable Paul Ryan
Chairman
House Ways and Means Committee
United States House of Representatives
Washington, DC 20515
 
The Honorable Sandy Levin
Ranking Member
House Ways and Means Committee
United States House of Representatives
Washington, DC 20515
 
Dear Chairman Hatch, Senator Wyden, Chairman Ryan and Representative Levin:
 
On behalf of the more than 200 CEO members of Business Roundtable, who lead major U.S. companies that provide health care coverage to more than 40 million American employees, retirees and their families, I write to express grave concern about the 40 percent excise tax on health care benefits created by the Affordable Care Act. We ask Congress to examine the proposed implementation of this provision of the law and act now to repeal, substantially change or, at a minimum, delay this tax to avoid potentially negative consequences.
 
As currently interpreted by the Internal Revenue Service, this tax will eventually apply to all Business Roundtable member companies. We believe this situation was not what Congress intended when constructing the tax. It will have broader implications than anyone anticipated at the time this provision was drafted. While Business Roundtable has long been an advocate of incentives to reduce the growth in health care costs and apply innovative solutions to increase access and affordability, we believe that the application of this tax does not further this goal.  
 
The broad application of the 40 percent excise tax means that, over time, the health benefit plans of all major U.S. employers will be subject to the tax. The impact of the eventual tax liability resulting from this provision is staggering and will distort the employer-sponsored health care marketplace, leading to dramatic changes in the benefits offered to employees. 
 
To avoid negative consequences, we suggest some alterations to the implementation of the tax. For example, the calculation of the benefit costs for purposes of the tax should exclude wellness programs, on-site medical clinics, employee contributions to health savings accounts, health reimbursement accounts, flexible spending accounts, and any “excepted benefits” (such as vision or dental care). These programs advance the intent of the tax, which we believe was to promote efficiencies in the market and encourage employees to become involved in their own health.  
 
Employers should be allowed broad flexibility in how they average benefit costs across their portfolio of plans, including the flexibility to aggregate or disaggregate all plans or plan options, as plans may vary in cost but not necessarily in underlying value. The tax should be implemented in such a way as to allow appropriate adjustments for geographical cost differences, so companies with a large number of employees in high-cost geographic areas will not be disproportionately affected. Finally, the tax should be indexed to realistically account for health care inflation, as the medical inflation rate increases more quickly than the Consumer Price Index for All Urban Consumers.
 
America’s employers are committed to offering high-quality, cost-effective health benefits to employees and their families but need relief from this tax to ensure that employees are not negatively affected due to diminished benefits. Business Roundtable calls on Congress to act now to repeal, substantially change or, at a minimum, delay the application of the 40 percent excise tax on health care benefits. 
 
Thank you for your attention to this important matter. We stand ready to work with you toward a solution that works for American businesses, employees and families.
 
Sincerely,
 
 
Gary Loveman
Chairman
Caesars Entertainment Corporation 
Chair, Health and Retirement Committee
Business Roundtable
 
C: Members of the United States Congress