Cadillac Plans and the Middle Class

[napi21]

http://factcheck.org/2009/10/cadillac-plans-and-the-middle-class/#


The liberal group Health Care for America Now is airing an ad that argues against a tax on high-cost employer-provided health care plans, a revenue-raising aspect of the Senate Finance Committee bill. "Some senators say they want to tax so-called ‘Cadillac’ health care plans, but those proposals will also tax the benefits of millions of middle class workers," the narrator says as an on-screen graphic pops up, claiming "40% tax on health care benefits of middle-class workers."

That’s a bit misleading. Most workers wouldn’t be affected at all, for starters. And even for those who are affected, it’s not a 40 percent tax on the value of all their health benefits, as the ad implies. The tax would fall only on the value of benefits that exceeds $21,000 a year for a family or $8,000 for an individual. (There are even higher cut-offs for retirees older than 55 and those in high-risk professions.) So, for example, a family plan costing $22,000 would generate a tax of $400 (40 percent of the $1,000 excess value). The tax is on the insurer, not the family. But such taxes are passed along to the consumer one way or another – for instance, an employer paying a higher premium might raise premium copays for workers.

snip

CBO Director Douglas Elmendorf said in congressional testimony Sept. 22: “mposing this tax would, in our judgment together with the Joint Tax Committee staff, reduce health spending over time by make – by removing what is essentially a subsidy in the current tax code to buy more health insurance relative to buying things that you have to purchase with after-tax income.”


I think CBO is right on this. The rest of the article states that employers would change their tactics and instead of increasing the various benefits of HC, they'd agree to increased wages which would offset the tax ex[ected to come from the tax on HC benefits to increased payroll and income taxes from the wge increases.

[sandnsea]

1. Unions are against these

No clue why, but they are. HCAN is working with the unions so they're opposing the tax too.

[Eric J in MN]

4. Unions are against it because they bargained for good insurance...

...over pay raises.

Now the policies for good insurance will be canceled if the tax passes.

[sandnsea]

8. Most workers don't have these policies

and the entire point of reducing the cost of premiums, for unions, is so workers can get more income. If unions can keep the same policy benefits for less money, then that's a good thing.

[Eric J in MN]

10. The employer pays the premiums.

If workers are covered by weaker policies which the employer paid less for, than that's worse for the workers.

[sandnsea]

11. Who says the policies will be weaker?

If this legislation does what it's supposed to, everyone will have better policies for less money. The point of taxing these expensive policies is to get the workers to start looking at the benefit and asking themselves if they're really getting value that's worth the premium and tax.

[MercutioATC]

2. Taxing health insurance premiums in any form is counterproductive and stupid.

If one can afford (perhaps with some subsidy from their employer) comprehensive health insurance that limits their liability, more power to them...and that's the sort of responsible decision-making we should be encouraging.

It's like a proposal to tax those who spend over a certain amount on education.

[napi21]

6. I disagree. It's more comarable to taxing excessive perks that

are given to executives. Their benefit is in excess of the average worker and taxed on that basis.

[MercutioATC]

7. The "average worker" can't afford $20k+ yearly tuition, either.

Should we tax everybody (even "average workers" who scrimp to be able to send their kids to a good college) for that?

[napi21]

12. I know that. Policies like those are provided by the employer, and

although I DOUBT the Union guys that are fighting this tax have coverage that costs that much, the tax would be on the provider NOT THE EMPLOYEE! Most of those expensive policies are provided to executives. So now your'e worried about THEM?

[MercutioATC]

15. Do you honestly think that a tax on employers won't be passed off to employees (and customers)?

...or that it won't result in employers simply stopping their premium subsidies and/or getting rid of comprehensive health insurance plans?

[napi21]

16. I think employers will opt for a policy that has a premium just

under where it would be taxed. That would then give those same unions the option to bargain for other benefits like wages & job security!

[Romulox]

3. "they'd agree to increased wages which would offset the tax"???

What part of near-depression level unemployment do you not get? Unrec.

[abelenkpe]

5. They increased our cost of

employer based health care this year to 6 percent for families and reduced coverage. In this economy I can't see employers raising wages at all. Where I work they just laid off all freelancers, about half the workforce. Would this increase the amount I have to pay for health insurance through work?

[Xithras]

9. It's the stupidest idea ever.

Healthcare for Americans is awful, so the solution is to penalize those who have managed to obtain good health care? What kind of idiocy is THAT?

The CBO is also missing another major possibility here...that the insurance companies might simply respond by scaling back coverage, or by slashing HMO payouts to doctors, to keep the benefit value below the annual taxation cap. The result would simply be reduced availability to those who need it.

The CBO, and you, are also missing the elephant in the room when it comes to costs. If there is NO reduction in costs for employers, what incentive will they have to raise pay to compensate for the extra tax? Employers across the country are already slashing employee wages and forcing employees to shoulder part of their healthcare costs, which both equate to reduced compensation. What magical logic fairy makes people thing that employers are suddenly going to relent and raise wages simply because their employees have a new TAX to deal with?

[TheCoxwain]

13. agreed .. my wife makes a pittance .. ( she has 2 masters and does cancer research)

all she has is a good health policy .. ( I am not sure if it Cadillac plan - but it quite good) -- but if congress taxes it I will be mad as hell..


We work very very hard .. get paid shit ( Really shit ) after earning advanced degrees ... and taxing us even more is a terrible idea.

[SoCalDem]

14. Here's the problem..

Employers love to tell their employees that the reason they can;t have a pay-raise, is because their health care costs are $XX.XX an hour and that the employer is paying this on their behalf..in addition to what the employee is paying.

so

IF the boss has been paying that $7 an hour he/she says they have, and if your share works out to $100 a week, the law change may mean that the boss will now have to ADD those two amounts together, and consider it all as income..even if you never see a penny of it as "real income".. That would surely bump a LOT of people into new tax brackets.

and

if the bosses start having to account for it all to YOU, he/she may just have to fess up that he hasn;t really been paying as much as he/she told you for all those years you did not get a real raise...or he/she may be about to lose the deductibility to HIM/HER, at taxtime.

Just opening up Medicare to all, and for the ones who choose it, having the per-person pay-in to medicare go from the paltry 1.45% it is now, to 5% + 5%, would probably cover the shortfall. (right now employee pays 1.45% and boss pays 1.45%)..Both would be off-the-hook for coverage now being paid for by each, so even without being "given" what the boss has now said they are paying, the employee would "win".