"'Cadillac' tax isn't a tax -- it's a plan to finance real health reform"

[Clio the Leo]

'Cadillac' tax isn't a tax -- it's a plan to finance real health reform
By Jonathan Gruber
Monday, December 28, 2009

As we prepare for the final round of debate over health reform, perhaps the most contentious issue will be financing. Both the Senate and House agree that most of the financing for reform should come from scaling back overpayments to Medicare insurers and providers, as well as excise taxes on some of the sectors that will most benefit from 30 million newly insured consumers. But the two houses remain apart on where to find the remaining dollars. In the Senate, the gap is closed by relying on the "Cadillac tax," a 40 percent assessment on insurance plans with premiums of more than $8,500 for singles and $23,000 for families. In the House, the gap is closed with a surtax on those earning more than $500,000.

The Senate assessment on high-cost insurance plans has much to recommend it, which is why it is almost universally favored by health policy experts. It would reduce the incentives for employers to provide excessively generous insurance, leading to more cost-conscious use of health care and, ultimately, lower spending. In other words, it "bends the curve." It would also be progressive, in that it would take from those with the most generous insurance to finance the expansion of coverage to those without insurance.

But there have been numerous criticisms of the Senate financing. Perhaps the strongest is that some insurance plans will be "unfairly" burdened. For example, firms with older employees may have higher insurance costs not because their plans are more generous but because the employees themselves are more expensive to insure. Thus, many claim that this is a tax not on excessively generous insurance plans but on those who happen to have high insurance costs.

But this argument misses an important point: The assessment proposed in the Senate is not a new tax; it is the elimination of an existing tax break that is provided to exactly these firms. Under current law, if workers are paid in wages, they are taxed on those wages. But if they receive the same amount of compensation in the form of health insurance, they are not taxed. As a result, the tax code has for years provided a large subsidy to the most expensive health plans -- at a cost to the U.S. taxpayer of more than $250 billion a year. To put this in proportion, the cost of this tax subsidy to employer-sponsored insurance is more than twice what it will cost to provide universal health coverage to our citizens.

The excise tax on generous insurance plans would simply offset this bias for the most expensive health insurance plans -- and only on a partial basis. To understand how, consider two firms. One has an average insurance cost per family of $13,000, the national average. The other spends twice that much, $26,000 -- perhaps because its workers are older or perhaps because it provides much more generous coverage. Under today's system, a typical middle-income worker at the first firm gets a tax break of $4,550 while a worker at the second gets a $9,100 break. Taxpayers are literally sending twice as much money to the second firm simply because its insurance is more expensive -- regardless of the reason.

All that the excise tax would do is mitigate this tax preference. The second firm in this example would pay a 40 percent tax on its health spending above $23,000, for a total tax of $1,200. Even after this tax, the second firm would get a net tax break of $7,900 -- almost three-quarters larger than the break for the first employer. So we have not taxed that second firm. We have simply (partially) offset the enormous tax break it was already getting from the government.

Moreover, most experts and Congress's Joint Committee on Taxation assume that most companies would not end up paying this tax but would instead reduce their insurance spending to below the threshold for the tax. And when firms reduce their insurance generosity, they make it up in higher pay for their workers. We saw this in the late 1990s, when the rise of managed care temporarily lowered insurance costs, and wages rose in real terms for the first time in many years. But as soon as managed care was weakened and health costs rose again, we once again saw flat or declining real wages in the United States.

By my calculations the excise tax in the Senate legislation will raise U.S. worker wages by a total of $223 billion over the next decade, which would mean about $660 in extra annual earnings per employer-insured household by 2019. Moreover, the vast majority of those wage increases accrue to middle- and lower-income households; 90 percent would go to families with incomes below $200,000.

<snip>

The writer is a professor of economics at the Massachusetts Institute of Technology.
(more)
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/27/AR2009122701714.html

[dkf]

1. We call it excessively generous insurance. Canadians Brits the French and cubans call it normal.

We have no ambition to let anyone in the United States get this kind of coverage and instead will tax it and penalize it as a luxury.

It's because we have to carry a bloated and unnecessary insurance industry and they don't.

Who is the loser here?

[xchrom]

+1

[depakid]

9. The legislation is riddled with other incentives too that drive people into junk insurance

with high deductibles and copays- along with poorer coverage.

[last1standing]

13. That's exactly why I don't want to see this travesty pass.

Unless changes are made in conference we will be effectively paying insurance companies to pretend to cover millions of people. Even if a family in poverty has their premium completely subsidized, it will do them little good if they can't afford the co-pay for seeing a physician. This means they will still overburden emergency rooms, they will still be forced into bankruptcy because they can't cover their medical bills, and the tax payer will still pick up the tab. The only difference will be the fact that we're taking a double hit since we've paid the insurance companies for absolutely nothing.

Honestly, if they fix that gaping hole, I'd support the plan. I just don't think it'll happen.

[deaniac83]

26. Actually, there I beg to differ

Canadians and Europeans have two important distinctions with our system:

First, and most importantly, they have single payer systems and they pay higher taxes for it. It's not as though it's free. Taxpayers in Canada and Europe pay for a single payer system. I would love for us to have a single payer system and I would gladly pay the taxes, but it IS important to note that they already have a tax for their generous benefits.

Second, the Canadians and the Europeans do NOT run to the doctor for a prescription because they have "restless leg syndrome." What some Americans do with their health insurance IS over-usage, ridiculously over usage. Canadians and Brits and the French and the Cubans do not do this. We have a class of people who have everything covered and drive to the doctor's office due to their 'restless leg syndrome' instead of just walking it off. Americans are loaded up on drugs. It's partly because those who have it good DO overuse the system - not for better health, and often for poorer health.

Another point here, as many of the excise tax's opponents have pointed out, a higher priced plan does not necessarily mean a better plan. Then it must also follow that a lower priced plan does not necessarily mean worse coverage. Right now, there is an incentive for large employers to spend a lot on health care plans without shopping around to find the absolute best plan because they get a tax break on it. Take away the tax break on the expensive plans, and they look harder, and it's possible that they might just find as good coverage for a lower price.

[depakid]

41. Want to put the skids on acronym maladies and "restless leg syndrome?"

Want to put the skids on disease mongering?

Go back to the rules on TV advertising of pharmaceuticals prior to 1997.

Get PhARMA's http://en.wikipedia.org/wiki/Propaganda_%28book%29">propaganda off of American airwaves (and rejoin the ranks of damn near every other western nation).

[spinbaby]

42. I think "over-usage" is a problem

Part of the trouble with our system is that there is powerful motivation to both under-treat those who can't pay and over-treat those with good insurance. I don't think that--except for a few hypochondriacs--people are motivated to overuse the system; I think the system is motivated to convince people that they NEED treatment.

[depakid]

47. What you're describing is called "moral hazard" and "rent seeking"

not trying to be pedantic- but just giving you keywords to use if you're interested in learning more about what you've astutely noticed.

[deaniac83]

64. That is absolutely correct

the insane bombardment of Pharmaceutical advertising on TV day and night is ridiculous. The pay-for-service rather than pay-for-results system is also driving people to get more and repeated tests done, take unnecessary medication, and have procedures done that don't necessarily make you healthier. We have a disease management system, not a health care system.

[northernlights]

52. Agreed. And one other thing

the tax is actually on income that is paid in the form of health insurance, not on the insurance company itself.

People with employer-subsidized health insurance have been getting higher income without an income tax on it for decades. I've been there, and I consider that wrong. I'd rather get the higher wage, pay the higher income tax and choose my *own* health insurance plan than be stuck with the plan foisted on me by the company I work for.

And back when I *did* have employer-sponsored Harvard Health, they left me to die from a systemic infection that was cured with 2 weeks on a normal antibiotic (my non-insurance, cash-paid dentist figured out the problem and saved my life). But for years I saw many, many individuals milking the same "cadillac" insurance plan for ridiculous things, including nose jobs and boob jobs and the like. :grr:

[deaniac83]

65. Yess.

The excise tax is an excellent way to decouple health care and employment. Which is a weird combination in the first place. No one should have to depend on the kind of job they have to determine what kind of health care they get, and on the flip side of it, American businesses should not have to be disadvantaged to their foreign counterparts due to health insurance costs.

[Cleita]

2. ROFLMAO!

:rofl:

I'm laughing so hard, it really hurts.

:-( :hurts:

[ShortnFiery]

3. You folks never give up. Spin Spin Spin ... no delivery! eom

[FrenchieCat]

4. Too bad you don't post anything that could be considered informational

you don't spin, you just have these one line drive byes....
which inform no one.

[Romulox]

6. LOL. The Truest of the true believers has little room to namecall.

:hi:

[ShortnFiery]

11. Hey, sorry but I'm amazed.

I have a life away from the keyboard but you seemingly have all this time for NARRATIVE. Even if it just justifies transferring all our middle class taxes to the upper 1%.

You have to be the most dedicated Obama volunteer on this planet not to mention DU. :shrug:

Really, you are amazing and that is partially a complement albeit also perplexing.

[Cant trust em]

7. Welcome to politics. Everyone spins.

Centrists spin to say that it's going to be great. Progressives spin to say that it's going to be shit. Republicans spin to say that it will create an Armageddon.

I don't know why this is such a revelation.

[Romulox]

8. Right. But there's "spin" and there's "this is so ridiculous that it insults my intelligence".

The op is in the latter category.

[ShortnFiery]

12. Centrists = Corporatists. I don't need to know spin to know my pocket is being picked. eom

[Romulox]

5. Love the satire in the OP! nt

[last1standing]

10. This op-ed is filled with gaps and supposition, making it effectively worthless.

To take each point in turn:

1). Prof. Gruber takes a good deal of time to tell us that taxing (or removing tax breaks as he calls it) good healthcare plans is an effective way to fund HCR but doesn't mention a word about the House plan to tax those making over $500k/yr other than in his initial statement. Suggesting that there would be a comparison and then ignoring one half of the argument is not very good analysis as it leave many questions - the first being: "Is the House plan better?"

2). The writer states that the removal of this "tax break" will level the playing field, but this is absolutely not the case. Many, if not most, middle-income recipients of these plans are members of unions that negotiated these benefits at the cost of pay increases. To begin taxing them would hit many struggling families with a bill of thousands at a time that it can least be afforded. It will cause many who are already financially strapped to fail financially.

3). Even Gruber admits that many of these expensive plans are due to aging employees but he doesn't seem to care one bit. He doesn't suggest an exemption for them or any kind of mediating legislation. He basically says that to make an omelette...

4). This is not a removal of a "tax break". It would be an newly imposed tax. The author can try to paint it as a pretty picture all he likes but it just doesn't sell. This will be a new tax that hits many middle-class families who are currently struggling.

5). Gruber uses statistics from the late 1990's to suggest a causative effect between managed healthcare and wages. For a professor of economics to do this is at least playing loose with the facts and at worst downright lying. The late 90's were a time of tremendous growth in this country leading to rising wages across the board in many sectors. It was also the first instance of real rising wages since Reagan entered office. It was long overdue. The connection between managed healthcare and wages was correlative, not causative.

6). Point #5 makes Gruber's calculations moot at best. Since there is absolutely no proof to his assertion of causative relations, there's no reason to believe that the magic of HCR will in any way increase average earnings by $6.60 let alone $660.00.

This was an extremely weak argument.

[Clio the Leo]

15. Oh, PLEASE dont let my wages go up!

.... that would be AWFUL ..... I work on commission. Sometimes, if I sell a lot, it actually bumps me up into the next tax bracket for the period and more taxes are withheld. But guess what? I STILL have more take home pay than when I sell less and am in the lower tax bracket.

And why am I concerned about those making a half million dollars or more a year?

[last1standing]

17. I would honestly love to see your wages go up (but that has nothing to do with my post).

I'm serious about that. I would like to see all of our wages rise since they've been decimated in real terms, but that isn't what I said. If this plan goes through it should be funded by those making the most, not by using a scattershot approach that will harm thousands of people who just don't have the income to support a thousand dollar tax hit.

Can we agree on that?

[Clio the Leo]

20. Ok so.....

.... if the entire point of the article in my OP was about how if employers begin offering less expensive health care plans they'll also increase wages (either because of negotiated union contracts or in an effort to keep workers in a more competitive labor market) and your contention was that the article is inaccurate but you WERENT even addressing the notion that wages would increase ... yeah ... I'm afraid I'm failing to see your point.

For the record, I like the House's plan as well and I'm all for making those in the higher tax brackets pay a bit more to help the less fortunate. But you'll forgive me if I fail to see the logic of providing a tax subsidy for the most expensive health care plans as we neglect those who have no health insurance at all.

[last1standing]

23. My point is that reducing benefits to workers will not improve their wages.

The author of the column uses one example to 'prove' his point but I'm saying that the reason wages improved at the same time managed healthcare came into play is correlative, not causative. In other words, while both things happened near the same time, they are not linked. The reason wages went up during that period is because the United States was experiencing immense growth and real unemployment was nearly non-existent. This caused real wages to increase for the first time in decades. It had nothing to do with changing healthcare plans. That is why I corrected you. I WANT your wages to go up (mine as well) and it seemed you were implying that I didn't.

As for "providing a tax subsidy for the most expensive health care plans", many of these plans are held by those making very little actual money, especially low salaried government workers. Many of these workers make around $20,000/yr or less and only work for the government because they absolutely require these "cadillac plans" for their families. Many are unions workers in the auto plants here in Michigan who have allowed their wages to be decimated in order to retain decent health benefits. To tax the plans these two groups receive would merely cause their employers to reduce their benefits with no increase in wages. I can speak from experience here because rising premiums have already begun to have this effect these workers in the form of higher co-pays on premiums and doctor visits.

[Clio the Leo]

28. read this....

.... he explains it in more detail....

http://docs.google.com/viewer?a=v&q=cache:sKQUHcyvVGgJ:econ-www.mit.edu/files/4845+joint+tax+committee+October+13th,+2009&hl=en&gl=us&pid=bl&srcid=ADGEESiUGj71aXXuIvDUlpoVM5mcFE8r2dYQi5--XjT8Yx_1ZShgh9T-D5mOn3V8daj35ZDlTqeCv7JUnLk5evMqapYIxGPQ_MXgeF4UabYf6ekrFqSrXp3fPCtu68xEPBSUDhMOWxaM&sig=AHIEtbRPBS9fsZIi6VFGrqO35yR3CSJGQA

[last1standing]

30. Sorry, I can't read the entirely of every document someone wants me to read.

Can you pull out the points you want to emphasize so that I can read them and consider your argument?

[Clio the Leo]

32. lol, seriously?

No. .................. it's a two page document with, like, a 14pt font .... unless you're a member of the "slow to read" Grand Old Party it wont take you that long. If I refute something I make sure I know what refuting.

'night.

[last1standing]

34. You're absolutely right. n/t

[last1standing]

31. I take that back. It was shorter than I expected.

The problem with the info from that link is that Prof. Gruber is still basing his entire argument on a flawed belief that holding down the cost of healthcare increases wages. There is absolutely no proof in existence that this is the case. In fact, I've never even heard this argument before today. It is laughable on its face.

Once again, taxing good healthcare is not only regressive, it will disproportionately affect the middle class workers who depend on effective healthcare for their families.

[Clio the Leo]

33. you read those tax committee reports that fast?

.... or at least the tables he's referring to?

Like I said .... 'night.

[last1standing]

35. As you said above, it's a two page, large font paper. Yes, I read it that fast.

And I still refute the faulty premise he's basing his entire argument on. It's just not realistic.

[flyarm]

38. read this..

White House Still Pushing the Excise Tax Hocus Pocus
By: emptywheel Wednesday January 6, 2010 10:56 am

http://emptywheel.firedoglake.com/2010/01/06/white-house-still-pushing-the-excise-hocus-pocus/

snip:

Yet, the White House has not revisited any of the assumptions it has made about the excise tax that seem to be increasingly dubious–such as that it will end up giving workers a raise.

Interestingly, the EPI has just released a paper debunking the claim.

There is logic to , but it is only skin-deep and deeper examination will show it to be simply not true. The logic can be seen looking at trends in health care premiums and wages—wage growth fared better in the late 1990s when health care premiums grew more slowly than in the early 1990s and wages performed poorly in the 2000s, a period when health premiums grew strongly again.

However, digging just a bit beneath the surface reveals the following:

Health care costs are not large enough to substantially move wages as these proponents claim;
Examination of actual wage and benefit trends confirms that changes in the trajectory of health care costs did not materially affect wage trends over the last 20 years; and
The wage behavior described—accelerating in the late 1990s and more slowly thereafter—actually best characterizes wage growth for low-wage workers who have minimal access to employer-based health care. Conversely, this pattern of wage-growth over time is least pronounced for higher paid workers with the most health coverage.
Clearly, this “health care theory of wage determination” is wrong, and other factors explain these overall wage trends. The simple explanation is that productivity accelerated in the mid-1990s, and the low unemployment (and hikes in the minimum wage) facilitated faster wage growth. That this wage growth disappeared entirely in the 2002-07 recovery is not due to faster health care cost increases but to weak employment growth and employers’ ability to achieve increased profitability rather than pass on productivity gains to workers. This reveals a fundamental flaw in our economy: productivity gains are not passed on to higher living standards for workers.

[dsc]

66. what competative labor market

offical unemployment is 10%. If you think employers are going to raise wages in this market you are deluded.

[Hardrada]

39. Have all our wages gone down by ten percent? I did not know that.

[pschoeb]

50. That point by Gruber alone proves he is an idiot

It's true there was a brief and small rise in real wages at the end of the 1990's, but coming to the conclusion it was due to managed care is seriously delusional. It's deciding that correlation is causation, even when there are much better causes that are already well known for the late 90 wage increase. Just one obvious cause, was that minimum wage was raised 4 times in the 90's, as opposed to once at the very beginning of the 80's, and only again in 2007 since 1997. There are many other obvious causes as well, like the tech and internet bubbles, as most of the wage growth was in the the top % of workers wages.

Also the whole managed care thing is largely bullshit, as numerous studies have shown it not to have had a statistical effect on lowering premiums during this time period.

[flyarm]

55. they most likely will not go up..this was posted to you earlier..do you just ingore it?

White House Still Pushing the Excise Tax Hocus Pocus
By: emptywheel Wednesday January 6, 2010 10:56 am

http://emptywheel.firedoglake.com/2010/01/06/white-house-still-pushing-the-excise-hocus-pocus/

snip:

Yet, the White House has not revisited any of the assumptions it has made about the excise tax that seem to be increasingly dubious–such as that it will end up giving workers a raise.

Interestingly, the EPI has just released a paper debunking the claim.

There is logic to , but it is only skin-deep and deeper examination will show it to be simply not true. The logic can be seen looking at trends in health care premiums and wages—wage growth fared better in the late 1990s when health care premiums grew more slowly than in the early 1990s and wages performed poorly in the 2000s, a period when health premiums grew strongly again.

However, digging just a bit beneath the surface reveals the following:

Health care costs are not large enough to substantially move wages as these proponents claim;
Examination of actual wage and benefit trends confirms that changes in the trajectory of health care costs did not materially affect wage trends over the last 20 years; and
The wage behavior described—accelerating in the late 1990s and more slowly thereafter—actually best characterizes wage growth for low-wage workers who have minimal access to employer-based health care. Conversely, this pattern of wage-growth over time is least pronounced for higher paid workers with the most health coverage.
Clearly, this “health care theory of wage determination” is wrong, and other factors explain these overall wage trends. The simple explanation is that productivity accelerated in the mid-1990s, and the low unemployment (and hikes in the minimum wage) facilitated faster wage growth. That this wage growth disappeared entirely in the 2002-07 recovery is not due to faster health care cost increases but to weak employment growth and employers’ ability to achieve increased profitability rather than pass on productivity gains to workers. This reveals a fundamental flaw in our economy: productivity gains are not passed on to higher living standards for workers.


xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

ohhh and don't miss this..sorry i don't have the du link for this but it was posted on DU and i thank the poster..but i don't have link..


Guaranteed head explosion: Billy Tauzin is now welcome at the White House If you are on Twitter, David Sirota, was just Tweeting about this one.

I think I need a stiff drink and to lie down for a bit. Remember all the railing President Obama did about Billy Tauzin during the campaign?

http://www.washingtonexaminer.com/politics/Once-Obama_s...

>White House visitor logs dumped late in the week between Christmas and New Year's Eve show that Billy Tauzin, the top lobbyist for the prescription drug industry and once a favorite target of Barack Obama, visited the White House at least 11 times in Obama's first six months in office.

The White House's open door for Tauzin, whom candidate Obama attacked as the embodiment of the revolving door and the corrupt collusion between politicians and industry, further dismantles the myth of Obama as the scourge of special interests. It also bolsters the conclusion that health care "reform" has become a boondoggle for the health industry, especially pharmaceutical companies.

During the presidential primary, in the spring of 2008, Obama ran a campaign ad aimed directly at Tauzin, chief executive officer of the Pharmaceutical Research and Manufacturers of America. In the ad, titled "Billy," Obama tells a small gathering of seniors:

"The pharmaceutical industry wrote into the prescription drug plan that Medicare could not negotiate with drug companies. And you know what, the chairman of the committee who pushed the law through went to work for the pharmaceutical industry making $2 million a year. Imagine that. That's an example of the same old game-playing in Washington. I don't want to learn how to play the game better. I want to put an end to the game-playing."

But Obama has played the game, and Tauzin was one of the first players he picked for his team. White House visitor logs show that between Feb. 4 and July 22, Tauzin visited his office an average of once every 15 days -- about as frequently as Tauzin probably collects that generous paycheck candidate Obama derided. We don't know how often Tauzin visited after July, because of the ad hoc nature of White House visitor log releases.<


xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

and i wonder why this was un'reced so much as to fall off the greatest..I guess the cheerleaders did not want anyone to see that your questions were answered already! It would sxlow down the propaganda machine too much!! and your talking points as well!

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x113054

[dkf]

14. Sounds like the same people who predicted saving the banks would keep small business loans flowing

It might work in theory but real life is another story. I highly doubt wages will rise after health care costs are contained. That holds two assumptions that are likely to fall through.

1). Costs will be contained leaving room for raises.

2). Business will raise wages

I just don't see it.

[FrenchieCat]

16. Ins. Premiums OVER $1,916 PER MONTH PER FAMILY will be subject to a 40% excise INSURER TAX

It appears that if you are a family who has an insurance package with a premium value of $1,916, a.k.a., Cadillac plan, your insurance company will not have to pay anything.

If your insurance package premium value is worth $1,917.00 PER MONTH, your insurance company will have to pay a 40% tax on that ONE dollar....not on anything below.

[last1standing]

18. Can you point out where it states that?

I'm not attacking, I'm honestly asking.

[FrenchieCat]

19. Here....

The Patient Protection and Affordable Care Act levies a new excise tax of 40 percent on insurance companies and plan administrators for any health coverage plan with an annual premium that is above the threshold of $8,500 for single coverage and $23,000 for family coverage. The tax applies to self-insured plans and plans sold in the group market, and not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals). The tax applies to the amount of the premium in excess of the threshold. A transition rule increases the threshold for the 17 highest cost states for the first three years. An additional threshold amount of $1,350 for singles and $3,000 for families is available for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions.
http://dpc.senate.gov/dpcdoc.cfm?doc_name=lb-111-1-151

So not only is it only applicable to employers (including self-employers), if you are retired and over 55 (i.e. union members who have great retirement benefits) or if you are employed in a high risk profession (police, firefighter, workers at a nuclear facility), your individual limit is $9,850 and your family limit is $26,000. To clarify, the 40% tax is also only on the amount above and beyond the above thresholds.

Who has this type of coverage in the current system?

The Kaiser Family Foundation, in its Employer Health Benefit Survey found that in 2009, the average cost of employer-sponsored coverage for individuals was $4,824 per year, and for families, $13,375 per year. Note that both amounts are little more than half of the prices of health insurance plans where a so-called Cadillac tax would kick in. The survey further finds that that 2% of workers with individual coverage have a plan that costs $8,000 or more in premiums and only 4% of workers with family coverage have plans with premiums greater than $20,000. Given the floor for the Cadillac tax is even higher, $8,500 and $23,000 respectively, a very very very small percentage of workers have plans that are that expensive. In other words, 98% of workers with individual policies from their employers and over 96% of workers with family coverage do not currently fall under this penalty.

Adjustment for cost increases: I have heard complains that the excise tax is not indexed for inflation. This is not true. According to the Congressional Budget Office, the "Cadillac" tax threshold is indexed.

Beginning in 2013, insurance policies with relatively high total premiums would be subject to a 40 percent excise tax on the amount by which the premiums exceeded a specified threshold. That threshold would be set initially at $8,500 for single policies and $23,000 for family policies (with certain exceptions); after 2013, those amounts would be indexed to overall inflation plus 1 percentage point.
http://www.dailykos.com/storyonly/2010/1/5/821971/-The-anatomy-of-the-Cadillac-Tax

[Clio the Leo]

21. Very interesting. NT

[last1standing]

22. Thank you. I like to speak on subjects I've actually looked into.

Excise Tax on High Cost Employer-Sponsored Health Coverage: The Patient Protection and Affordable Care Act levies a new excise tax of 40 percent on insurance companies and plan administrators for any health coverage plan with an annual premium that is above the threshold of $8,500 for single coverage and $23,000 for family coverage. The tax applies to self-insured plans and plans sold in the group market, and not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals). The tax applies to the amount of the premium in excess of the threshold. A transition rule increases the threshold for the 17 highest cost states for the first three years. An additional threshold amount of $1,350 for singles and $3,000 for families is available for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions.

The way I read this is that these plans will be taxed for everyone except those who are financially able to buy their own plans, a group that is generally much wealthier than the average citizen. Perhaps I'm reading that wrong, but it does seem to list an exemption for individual plans.

I would also suggest that the belief that the insurance companies won't funnel extra funds into dubious 'medical expenses' that somehow end up in their directors' pockets is not one that I share. We've seen it happen repeatedly and there are too many loop-holes and gaps in the legislation as it stands today that will allow this to occur. For instance, who is the final authority on what is a medical expense and what is not? Will this be self regulated or will there be a properly funded and independent set of regulators looking into this?

I would also note that there is no exemption for elderly people who remain in the workforce. This demographic could well end up taking a big hit at the time in life they can least afford it.

Lastly, while I know it is of little concern to many who advocate for this plan, there is a definite bias against those who are not legally allowed to marry (ie. homosexuals). It is interesting that once again, those in the GLBT community will be forced to pay extra for the "sin" of being born gay.

Of course, some of this could change in conference and I would still not support it unless not only premiums but also co-pays are covered for those in need so that the poor can actually afford to see a physician.

[FrenchieCat]

24. first let me ask how you came to these conclusions?

We are first of all talking about 2 to 4% of the population.
And we are talking about a tax levied on insurance companies.
It is the amounts above a $23,000 plan that would be taxed,
not the entire premium.
The first $23,000 premium per year for a family will not be taxed,

In addition, those who are 55 years and older would get an additional
$3,000 exemption to be applied.
That's up to $26,000 for premium value before it is taxed.

Once one reaches 65, they go on Medicare, so I don't know about this
No provision for the elderly who stay in the workforce.
You don't disqualify for Medicare because you work as long as you reach
the applicable age.

An average premium is not more than about $13,500 per year per family.
This means that a family would have to have taken out a premium that is twice
the value of the average premium.

so how do you concluded that this tax would be applied to "everyone except those who are financially able to buy their own plans"? :shrug:


As for individual plans...that would be me; not because I'm financially well off, but because I am self employed, and so there is no employer that does the heavy lifting and pays for a portion of my plan. That means I'm least able to afford it, not better able. You try paying almost as much for health insurance as it cost for an average mortgage!

so I don't some of your analysis....

[last1standing]

25. To respond...

To address each of your responses:

1). If premiums are reduced for those workers with good benefits now, that means they will be burdened with higher co-pays, making it an effective tax on these workers.

2). If you read closely, the clause states that only those people who are over 55 years of age AND retired will be further subsidized. It does nothing for those who still work so are as I saw. Please correct me if I'm wrong on that.

3). I used the term "elderly" to refer to those in the workforce from 55 onward. I admit this was not the best term and probably confusing.

4). Many government and other unionized workers receive stellar healthcare in lieu of wages. Since these wages are very unlikely to increase when benefits are reduced, these will be the people hurt most by this plan (other than the poor who currently will still not have the money to see a physician).

5). I did not say that those who are financially able to buy their own plans would not be taxed. I said that it would not affect them like it would unionized workers who make little money but have good benefits. Then there are those in the indiviual market who are not going to be taxed. They will make out rather well.

6). If you are paying for your own insurance, I'm sure you are paying quite a bit. The problem is that the scattergun approach being used by the taxation method approved by the senate hits you, me and many, many others indiscriminately. This is why any extra taxation should be based on income, not generalizations that 'most' people who have this or that will somehow fall into a taxable group. Doing this always results in harming many who cannot afford the taxes while leaving those who can running to their tax attorneys in search of loop-holes.

[FrenchieCat]

27. I don't get this from reading what I read......instead, I get that 2 to 4% of workers would qualify.

as it states....

In other words, 98% of workers with individual policies from their employers and over 96% of workers with family coverage do not currently fall under this penalty.

[last1standing]

29. But that percentage still accounts for millions of people.

Many of whom are regular, middle class workers and their families who make little money but have good benefits. These people will be hit with reduced benefits but no added pay to compensate them. This method of taxation is nothing more than a scattershot approach that ends up harming the middle class instead of the advertised target.

Even so, I would reluctantly (very reluctantly) support it if it was likely to have the stated effect of allowing the poor to actually receive healthcare. As it stands I don't believe the plan coming out of conference will do that. This means we will end up paying for healthcare that the intended recipients still cannot afford to utilize. Only one group of people wins in this scenario and I know I'm not one of them.

[FrenchieCat]

36. Yeah....6 millions to 8 million might end up with plans that are not as luxurious as what they have

now, although they may end up with higher wages due to it.

The Unions have been saying for years that they would prefer higher wages, but they would settle on making sure to have health benefits. They understand as much as we do that health care cost has to be controlled, and further, most of them wouldn't even be affected (although they fear they might, but they probably could easily find out if their health plan insurance is over $23,000 per year if they wanted to, and then they would know for sure that anything over that threshold will end up getting taxed with the tax bill sent to the insurance companies).

On the other hadn, this is, in large part, how 30 million people can get insurance; and or be heavily subsidized!

Where's your documentation that it is regular and middle class workers who get more than $23,000 insurance health packages?

Very good benefits is not $23,000 a year, or nearly $2,000 per month!
That's way more than "good".
It is even past excellent!
Sorry.

Everything else you state is based on what you "Believe" which has nothing to do with more than your personal opinion of how government works and some theories that do not line up with what many economists believe in reference to the consequences of this excise tax on premiums higher than nearly $2,000 per month for a family!

I think you are envisioning the worse because that is what your experience has been, so I understand the fear of change, but it really doesn't have as much to do with this 2-4% in this current Senate
legislation...IMO.

IT almost sounds like one who doesn't want to tax the more premiums of the highest health care premium avalaible, and you would want to encourage it to continue...which really reflects a tiered health care system which caters to those with the better plans.
Yes, this health care plan means that the not so wealthy and the ones not so lucky would now benefit.....

I thought that is one of the things we stood for. Now, instead, all of the sudden, we should be more concerned about the 2-4% with Cadillac plans rather than the 31 million uninsured?

See, that is why change is so difficult, because no one wants to be the one that has to give up anything for anyone else. At the end of the day, we want it all, and we want it now, and we want it perfect, and anything else; well, it's just not good enough.

I haven't come to any conclusion on this Cadillac Plan, but the arguments that I have heard deal more with the fear of what "maybe might" happen that wouldn't be as beneficial to a few, rather than anything else.

I don't quite get it, but that's ok....because soon, I hope, we shall all see exactly.

[last1standing]

37. Good healthcare is not a luxury. That was a really crass remark to make.

I'm not attacking you, but I am attacking that remark. There are many reasons for high insurance costs, age, pre-existing conditions, size of family, high risk grouping, etc... This is not my "belief", it is fact. Hitting these people indiscriminately is callous and cruel, yet this is exactly what this plan will do if left alone. It is effectively a regressive tax on millions who cannot afford it. Reducing their benefits will not create a one-tiered healthcare system, it will create a system where those who have more will continue to have more while those who are poor or middle class either gain nothing or see their benefits reduced. It actually takes us further away from an equal system.

As for wages increasing when benefits are reduced, that is nothing more than warmed over trickle-down economics. The wealthy NEVER give money away that they don't have to and with unemployment over 10% there is little incentive for them to do so now. It's a false premise. It will not happen. Ever.

I can't understand why the people who would be screaming loudest if a republican tried this kind of thing are fighting for it now. If I sound exasperated it's because I am. I know you know better than to believe in this fallacy as do the others here. I can't understand why saying so is considered "freeperish" just because the side proposing it has changed. Can you tell me that the plan being cobbled together today has much resemblance to what we were promised on the campaign trail?

[FrenchieCat]

40. Sorry, but in this current system, healthcare is exactly a luxury....

although that is not how it should be. Too many people don't have it not to call it that.

But what I said, and I say it clearly is ..."not as luxurious"
that's not the same as literally stating that I believe that health care is a luxury...cause that would be you lying on me...so please do not attempt to recast my words out of context; cause that is a cheap shot; especially to have worked an entire response due to literally getting it twisted.


And This bill exactly deals with Pre-existing conditions, age, high risk, etc....

as for everything else you've just typed; we are still talking about 2-4%
who would not be taxed, as they are not the insurer,
and they will not be denied health care....

See, when I look at it close, I'm not sure who is speaking in Freepish terms....
the one that states that superior benefits of 2-4% need to be more of a concern above the millions who have next to nothing,

or you attempting to read into my words something that is clear wasn't what was meant.

so I'm not sure if you are debating this in an intellectually honest manner.....
cause some of what you are talking about borders on hyperbole.

And yes, to a great extent this plan does many of the things that Obama discussed on the campaign trail....in my opinion. And no, he couldn't get it all exactly as he had outlined in every way.

[last1standing]

44. When you call good healthcare "luxurious" I don't think I'm taking you out of context.

Proper healthcare is not a luxury, nor is it luxurious if that makes a difference. It was a very poorly chosen word. As for the rest of what I said, I was not trying to call you names or suggest you were a freeper. I was stating that 2-4% of the population equates to millions of people who will be adversely affected by this travesty and these workers do not have the money to spare for yet another cut in benefits, pay or increased taxes. There is a viable way to pay for this plan in the house bill yet it is being shunted aside in order to lay more and more of the burden on the very people who can't afford it. It is the wrong thing to do. If you do not believe that is intellectually honest, then there's really nothing more to say.

And no, there is very little in the way of major policy in this bill that Obama campaigned on. It doesn't make someone deceptive to call that out. We have not gotten what we voted for with this bill.

[flyarm]

54. the 2-4% you keep bringing up is millions and millions of Americans that will see their coverage

lowered ..if not dropped completely by Unions and employers..passing the full burden on the workers of America!

[Bluenorthwest]

60. As always, you see only those exactly like yourself

People in other than paper pushing occupations often take physical risks which makes their insurance very important. In addition, many of these occupations are 'seasonal' or multiple employer situations, in which consistent fully paid health care is extra important, because one might not always be working when the need for care arises. Some occupations have down times, and up times. And because of this, they will often trade money raises for the sort of health care insurance that they need. It is very likely not what you need. But you are not in those occupations, nor in any Union.
Your assumptions about millions of people are typical of your ignorance and lack of experience outside your tiny world.
You keep calling that which many millions need to serve their lives and occupations by the far right wing term 'Cadillac Plans'. That alone shows all your cards. Luxury. Damn, just damn.

[pschoeb]

48. The problem is indexing it to inflation

Health care premiums have risen at a much higher rate than inflation, every moron knows this. So indexing this to inflation is the problem, as lower and lower actual benefit plans will be taxed over time. This is the argument being made, not your false strawman, "some people say it's not indexed to inflation when it is" bullshit. People are saying it is not PROPERLY indexed, because Health premiums rise much faster than inflation.

[Hello_Kitty]

58. Many large companies self-insure.

They hire an insurance company to administer the plan but it's their pool of money. This excise tax will cause them to cut back on coverage, which will transfer more out-of-pocket costs to employees. Because this tax is badly indexed, more and more plans will fall under it. Yet another transfer of wealth from the middle class to the rich.

[uponit7771]

45. DAMMIT!!!! They don't need no facts round here!! Jus anti Obama 24/7

[DevonRex]

53. Yep, they're the "true believers" of anything anti-Obama. They have "faith"

that Obama is evil. EVIL I tells ya!!!1111

[dsc]

67. or single at 8300 a year which is not even 700 a month

and 700 a month isn't Cadillac.

[jumptheshadow]

43. So now the govt. is backing age discimination?

>>The other spends twice that much, $26,000 -- perhaps because its workers are older or perhaps because it provides much more generous coverage.<<

How many companies will hire older workers if they can pay lower taxes by hiring younger ones?

[uponit7771]

46. no

[jumptheshadow]

49. Yes, this is clear age discrimination (nt)

[kenny blankenship]

51. That might not be so laughable if there were real health care reform.

With the Public Option used as bait, and then switched out at the eleventh hour, the idea of taxing health benefits to pay for the final "reform" is just a bad joke.

[freddie mertz]

56. You can't make a silk purse from a sow's ear.

And the emperor, in fact, is wearing no clothes.

Thanks for the laugh though.

"The tax is not a tax"....funny!

[silverhandorder]

57. Tax can easily be passed on to employers and they can do the same to the workers.

Insurance companies can raise their price to make up for the tax. All that this is doing is it is making it more expensive for people to buy health insurance.

It would make more sense to simply bring our troops home and use the money we save to pay for this.

[Hello_Kitty]

59. Claim that wages will go up with reduced health benefits debunked by the EPI:

http://epi.3cdn.net/f121df10fab53d2b16_3nm6bhd7e.pdf

[Bluenorthwest]

61. Ah yet again. Let your yes mean yes and your no mean no

This tax is not a tax.
But a hypocrite is still a hypocrite.

[Warren Stupidity]

62. "they make it up in higher pay" - no they don't.

The supposed proof of this idiocy is?

[Vattel]

63. Thanks for the laugh.

"It's not a tax; it's the elimination of a tax break." LOL. That reminds me of when my boss cut my wages and told me that it wasn't a wage reduction; it was just the elimination of an earlier wage increase.

"It would also be progressive, in that it would take from those with the most generous insurance to finance the expansion of coverage to those without insurance." Stop it, you're killing me. Next you'll tell me that a sales tax on food is progressive because those who can afford more expensive food will pay more. OK, set aside that it's not really a progressive tax. (Or should I say, it's not really a progressive elimination of a tax break.) Is it at least fair? No, because if my plan is expensive enough to qualify as "Cadillac" because more of the employees where I work are older, or are in a high-risk group, or because my union traded higher wages for a good healthcare plan, then I am apt to be hurt more by the new tax (I mean, by the new elimination of the tax break) than any number of wealthier persons who have lower-cost plans and equally good or better healthcare.

[shopgreen]

68. so they call it "assessment". In real life it is a tax. Unions fought hard for

these benefits only to be taxed!!