Why Taxing Health Care Plans Is A Bad Idea

13 Jan, 2010 by William Teach

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And interesting report, found via the DU. Even Physicians For A National Health Program think taxing “Cadillac Plans” is a bad idea

The health reform bill which passed the Senate in December would impose a 40 percent excise tax on health insurance plans with premiums above $23,000 a year for families and $8,500 for individuals. The tax would hit insurers and big self-insured employers–who would force them onto workers.

There are three key ideas put forward in support of the benefits tax–the tax will hit only lavish plans, it will help bring down health costs, and employers will pass the cost savings directly into wages.

All are wrong.

The myth of rich-benefit “Cadillac” plans is the first flaw in the theory. By 2019 the benefits tax would hit one-fifth of households making between $50,000 and $75,000 a year, according to figures from the Congressional Joint Committee on Taxation. The tax would pose a heavy burden on working families.

A long post by the PFNHP, worth the read, even if it is, obviously, from a progressive point of view. We see the story of one worker, Betty Diamond, a member of the Communications Workers of America for AT&T, and how this tax could hit her easily. Why?

I’ll add a bit in. $8,500 is not that much money when a company, particularly a large company, is providing health insurance, particularly since the plans have tended to be pretty good, meaning people use the heck out of them. A few years ago, my company, a very large company (hint), switched all non-bargained to Health Savings Accounts. Why? Because they bring the costs to the company down from around $10k to $12k per year per employee down to about $6 to $8k per year. Remember, the Senate legislation puts massive restrictions on HSAs, in an attempt to stop them. So, what would the tax be on? What the company pays? A combination between what the company and employee pay? Who pays the tax, the company, the employee, or both? We don’t know, the legislation is not specific. But, we do know that quite a few plans will be nailed.

Are HSAs perfect? No. They do, at times, keep people from going to the doctor when they really should. I know there have been a few times when I probably should have gone, and didn’t. But, I also did not run to the doctor when I had the flu, and instead just got medicine from the local CVS. Not that I would have, anyhow, but, you get the drift.

Of course, pretty much everything in this legislation is ridiculous. You know what would really decrease costs for someone like Betty? Allowing nationwide pooling for a company the size of AT&T.

The article also highlights what liberals want: health care where someone else picks up the majority of the tab. They seem to have an issue with actually paying to take care of themselves. A new SUV, a new flat screen, everyone with a mobile phone, you name it, they want it, and will pay for it. But, paying for their own health care? Forgetabout it! Someone else has to pay.