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Hillary Clinton Supports Repealing ‘Cadillac Tax' on Health Plans

The Affordable Care Act's tax on high-priced health insurance plans is opposed by labor unions and Republicans

THE WALL STREET JOURNAL

By Laura Meckler And Stephanie Armour
Sept. 29, 2015 6:55 p.m. ET

Hillary Clinton said Tuesday that she would support repealing a tax on high-priced health insurance plans that was enacted as part of the Affordable Care Act, a provision reviled by labor unions because it affects many of their members' plans.

The drive to kill the tax has been pushed mainly by Republicans, and support from a high-profile Democrat like Mrs. Clinton could give it fresh momentum.

Mrs. Clinton, the front-runner for the Democratic presidential nomination, has attempted to strike a balance on the 2010 health law. She has vigorously defended the law while also promising to address what are seen as its shortcomings. Last week, she proposed new caps on out-of-pocket costs on private insurance plans.

On Tuesday, she described repealing the tax as “strengthening� the law while reiterating her view that the law is working well. That is a contrast with other Democrats who have feared supporting the repeal would be read as undermining the health law itself.

Informally known as the Cadillac tax, the provision will impose a 40% levy on benefits that exceed $10,200 for individuals or $27,500 for families if it takes effect as scheduled in 2018. It was included in the health law both to raise money to offset the new spending in the law and to discourage expensive plans, which some argue drive up the cost of health care.

As a result of the tax, employers are expected to adopt plans with higher deductibles, putting employees on the hook for a greater share of the cost.

“Too many Americans are struggling to meet the cost of rising deductibles and drug prices,� Mrs. Clinton said in a statement. “That's why, among other steps, I encourage Congress to repeal the so-called Cadillac tax.�

The cost of the repeal—about $80 billion over 10 years—should be offset with other changes she has proposed, Mrs. Clinton said, such as limiting tax deductions for prescription drug companies. Her campaign has said the ideas she put on the table last week would raise more than $100 billion over 10 years.

Beyond the impact on the health system, the proposal carries political weight as Mrs. Clinton courts labor unions, who are influential in the Democratic nomination contest. Union members often enjoy generous health benefits—which labor leaders say were hard won through negotiations—and have opposed the tax from the start.

Mrs. Clinton's announcement comes as she faces a strong challenge from Sen. Bernie Sanders, a Vermont independent whose positions are largely in line with labor's agenda. He opposes a pending Asian free trade deal and supports a $15 an hour minimum wage. Mrs. Clinton has said she is undecided on the trade agreement, saying she will withhold judgment until the pact is finalized, and supports raising the minimum wage but to a lower threshold.

Last week, Mr. Sanders came out in favor of repealing the tax on high-priced insurance plans.

Some employers already are reviewing or trimming health plans to minimize the effect of the coming levy. With the changes, the repeal effort has gained momentum in Congress, with two bills pending in the House and two in the Senate. The effort has forged uncommon allies as unions, business groups, insurers and some Republicans join forces with a small but growing number of Democrats. The White House opposes repealing the tax.

Among lawmakers, the major hang-up has been how to make up for the lost revenue. Just one of the bills addresses that issue, and even it doesn't specify where the money should come from.

On Tuesday, Rep. Paul Ryan (R., Wis.), chairman of the House Ways and Means Committee, included a repeal of the tax as part of a larger budget bill that included other rollbacks of the health law. “This bill is a big step toward dismantling Obamacare,� Mr. Ryan said.

But a spokeswoman for the Republican National Committee, Allison Moore, said Mrs. Clinton was hypocritical for saying that the Affordable Care Act is working while also supporting the repeal of this provision. “Hillary Clinton is trying to have it both ways on this failed law because she is under pressure from union bosses,� she said.