Tax on 'gold-plated' health care plans gains ground

[sledgehammer]

White House officials are embracing a plan to tax "gold-plated, Cadillac" insurance policies, giving momentum to an idea that is receiving bipartisan consideration on Capitol Hill.

"A premium charge on top of the most expensive packages is one of the ways to ensure that there's a lid on health-care costs," a top administration official told POLITICO. "The president believes this is an intriguing idea."

Sen. Charles Grassley of Iowa, the top Republican on the Senate Finance Committee, said Friday on Bloomberg TV that he is "taking an intense look at it."

And top House leadership official told POLITICO that the plan is "something we can live with."

The idea meshes with House Speaker Nancy Pelosi's comments in recent interviews that the medical industry, including insurers, can do more to contribute to the cost of health-reform legislation.

Obama told Jim Lehrer of PBS' "NewsHour" on Monday: "What's being talked about now, I understand, is the possibility of penalizing insurance companies who are offering super, gold-plated Cadillac plans.

"I haven't seen the details of this yet, but it may be an approach that doesn't put additional burdens on middle-class families," Obama said. "My whole goal is not to add burdens to folks who are already having tough times affording insurance, but actually to relieve it. And so I've got to look at the details of that before I make any kind of final determination.

Sen. John Kerry (D-Mass.) has floated the plan, which would charge an excise tax on policies that exceed a specific amount, perhaps tied to the average benefit received by federal employees.

Grassley said Friday on Bloomberg Television's "Political Capital with Al Hunt": "We're taking an intense look at it. I bet it's been a subject of discussion for two days of the last four or five."

"We're interested in it, not for the sole reason of raising money, although it would do that," Grassley said. "But we have plenty of health economists explaining to us that high-end insurance policies — not that the health-care is not legitimate, but should there be a subsidy of that health-care, and should you have the perverse incentives to over-utilize and have high cost care and drive up the inflation? And we're interested in it as a discipline within health care."

Senator Olympia Snowe (R-Maine), another swing vote on the Finance Committee, said the idea "may be a practical option, as a way of attacking future costs in health care and driving them down and creating disincentives for the most expensive policies," Bloomberg News reported.

A key argument for the plan is that the top few Goldman Sachs executives receive policies worth $40,000 each, the administration official said.

"We want to make sure the insurance companies know that there's a price associated with that," the official said. "That's one way you control health-care costs."

<snip>

More at: http://www.politico.com/news/stories/0709/25421.html

**********

[ProgressiveProfessor]

1. This will make many union members unhappy

Using the Federal Employee Health Program (FEHP) as the baseline means that just about every state or school district health care program will be above the line.

I had heard that this had died more than a week ago. Anybody have an update on that?

[lostnfound]

2. Generally against this idea.

I hate to see still more complexity in the tax code, which ends up wasting the time of so many human beings in ways that don't exactly help society. I am completely in favor of seeing higher corporate taxes!!, but simpler is better. The $700 per head idea if you don't offer health care to your employees sounded like a good, simple idea. By contrast, the chances of actually collecting additional taxes from this type of approach isn't guaranteed, since so few corporations actually pay income tax due to multiple loopholes, carry-forward of deductions, etc. etc. Losing the deductibility of high-end plans may net little money for the federal government.

Further, there are some businesses where the high-end market spurs creative ideas that improve service across the board, because providers start thinking about how to differentiate their service to attract the high-end customers and they discover things that people wanted all along that don't actually cost a great deal more. One example of something occurring on high end plans which I wish it WOULD spread to 'ordinary mortals' is that the execs get to go to ONE place and get all of their routine care taken of smoothly in just one or two days -- the dentist, skin cancer screening, the GP, the mammogram or colonoscopy or whatever is due for their age. I envy the efficiency of that. In the case of the execs, their "one place" to go for these is a spa-like environment, but for mere mortals, it would be nice for average working class parents to not have to worry all the time about missing work or finding day care to cover for the multiple appointments every year that are required.

When the bells-and-whistles don't cost too much extra, they sometimes become standard -- at least on consumer products, maybe not often on services.

There are other businesses where the high-end market keeps the overall market alive during tough times. I would doubt that's the case in health care but wouldn't be surprised if the insurance companies who sell both 'products' to their large corporate clients do use the luxury plans as a way to improve their margins.

On the other hand, these policies are definitely untaxed perks to these high-paid employees -- and yet another way tha tax structure isn't progressive.