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Time: Cadillac Health Plans Not What You Think

John on July 28, 2009 at 9:14 am

They could have headlined this: Government tries to outsmart markets; fails again:

[S]ome lawmakers have proposed capping the amount of employer-sponsored health insurance that could be provided tax-free — leaving only workers with pricey, so-called Cadillac health plans worth north of $25,000 a year subject to new taxation…

[T]he powerful Senate Finance Committee has reportedly pivoted from taxing workers to embracing a plan to tax the insurers who offer the most expensive health-insurance plans…

It may seem like a neat solution to a thorny political problem, but as with every aspect of health reform, it’s not nearly that simple. For starters, most large companies (1,000 employees or more) are self-insured, with a private health-insurance company merely acting as the benefits administrator. In these cases, Kerry’s proposal would levy the excise tax directly on employers, whose extra cost burden could be (and many say most certainly would be) passed onto employees in the form of higher contributions to premiums, higher deductibles and higher co-pays. “It is not a tax on insurers,” says James Klein, president of the American Benefits Council, which advocates for employer-provided benefits. “It is a tax on employers and, therefore, workers.”

Moreover, the term Cadillac health plan is a tad misleading. Aside from a small number of corporate executives — like the CEO of Goldman Sachs who reportedly enjoys a health plan costing $40,543 a year — many of the Americans with health-insurance plans substantially above the national average (which is about $13,000 for a family of four) are state employees and union members…

“If people think these Cadillac plans are primarily covering wealthy executives, they are mistaken,” says Tom Billet, a senior health-benefits consultant for Watson Wyatt, a corporate consulting firm. In reality, many more of the most expensive employer-based health-insurance plans cover people like the families of New Hampshire state employees who, according to the Boston Globe, have policies worth $20,400 per year. (The employee contribution is $60 per month.)

So whadda ya know…costs get passed on. Never would have seen that coming. And, in addition, it turns out that “Cadillac plans” are mostly held by state employees and union workers. No wonder GM went bankrupt.

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Category: Health & Education |

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