Clinton Calls for Repeal of 'Cadillac Tax' on Healthcare Plans

U.S. Democratic presidential candidate Hillary Clinton called on Tuesday for the repeal of the "Cadillac tax" on premium health insurance plans that was created under President Barack Obama's sweeping healthcare law.

The move by Clinton, the Democratic front-runner in the 2016 White House race, is a break with the Obama administration that could win her more backing from some of the labor unions critical to her White House bid.

Labor unions oppose the tax because their members often receive more generous healthcare plans and they fear it would raise their costs. Clinton has been under pressure to oppose the tax as she vies for union support with her top Democratic rival, U.S. Senator Bernie Sanders of Vermont, a longtime foe of the tax.

Clinton said the repeal would be another element in her package of reforms to build on Obamacare. Last week, she offered plans to rein in prescription drug costs and lower out-of-pocket healthcare costs.

"Too many Americans are struggling to meet the cost of rising deductibles and drug prices. That’s why, among other steps, I encourage Congress to repeal the so-called Cadillac Tax, which applies to some employer-based health plans, and to fully pay for the cost of repeal," Clinton said in a statement.

The Cadillac tax, which would not take effect until 2018, is a tax on employer-based coverage that exceeds the thresholds of $10,200 a year for individuals and $27,500 for families.

The tax, designed as one of the primary ways to rein in healthcare costs under the law, would be imposed on employers. They could avoid it by replacing expensive plans with cheaper ones.

Clinton's campaign said the estimated $87 billion in lost revenue from repeal of the Cadillac Tax would be offset by her reform plans released last week.

One component, the requirement that drug companies provide higher rebates for low-income people covered by the Medicare healthcare program for the elderly, would generate $100 billion in savings alone, her campaign said.

The move follows months of signals from Clinton that she believed the tax was a problem. She had promised labor leaders she was looking into possible fixes.

Terry O'Sullivan, president of the Laborers' International Union of North America, praised Clinton's proposal to scuttle the tax.

"We're encouraged that all of the Democratic candidates for president and a growing bipartisan movement in Congress are working to repeal the tax before its implementation in 2018," O'Sullivan said.

Sanders, a longtime opponent of the tax, introduced a bill with other Senate Democrats last week to repeal it. The Obama administration has repeatedly backed the controversial levy.

(Additional reporting by Amanda Becker; editing by Sandra Maler and David Gregorio)