There has been a lot of grumbling inside the progressive inner-divide on the health care debate about the so-called 'Cadillac tax.' The Senate-passed bill raises $150 billion over 10 years by this method. The idea is to recede the tax exemption on high-end employer-provided health insurance plans. A lot of labor unions are understandably angry because their members have given up wages to keep and earn these benefits. On the other hand, there seems to be somewhat of a meeting of the minds among the policy wonks that this is an effective cost control measure. So what's going on?
I decided to actually look into the policy. Who it applies to, whom it is going to affect and to what degree, and what the cost controls, if any, are. I wanted to look into whether the claims of this being a cost control measure are true. I also wanted to look into whether the claims of this being a policy that balances the health care woes on the backs of working people is true. I must admit that I consider myself more of a policy wonk. Perhaps I best self describe as a empathy-driven policy wonk, however.
Whom does the tax apply to, and whom doesn't it apply to?
(snip)
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.
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. According to the Congressional Budget Office, the "Cadillac" tax threshold is indexed. http://www.dailykos.com/storyonly/2010/1/5/821971/-The-anatomy-of-the-Cadillac-Tax-(or,-it-doesnt-eat-babies)
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