Upcoming Obamacare Tax on Comprehensive Plans: Even the Unions Are Against It
Around the State
It may be more than four years away from coming into effect, but one of the many new taxes imposed by the Democrats' Obamacare legislation -- an excise on so-called "Cadillac" insurance plans -- doesn't sit well with one of that party's key constituents: labor unions.
And unlike the other tax increases explored in this series, this one “actually has a conservative pedigree,” Ryan Ellis, tax policy director for Americans for Tax Reform, tells Sunshine State News.
“Cadillac” or “gold-plated” health insurance plans are those which provide comprehensive coverage with little or no deductibles or co-payments but at the cost of high annual premiums. These are the sorts of plans owned by both the very wealthiest of Americans and many who belong to unions and receive them as benefits from their employers, often in exchange for lower wages.
Beginning in January 2018, insurance companies will be charged a new 40 percent excise tax on premiums paid above certain thresholds: $10,200 for an individual plan, $27,500 for a family.
Ellis explains that the idea for this kind of a tax had been floated, even in conservative circles, since at least the 1990s, as a way to discourage employers from offering the most expensive sorts of health care plans, which critics say encourage overuse of medical care.
“One of the few things that conservatives and liberals agree upon in the health care world is that we need to have individuals purchasing their own health insurance, but we mean very different things by that,” he says. “The idea of getting your health insurance from your employer is an anachronism from World War II, as a way for employers to get around wage and price controls. It's a very inefficient way to get people health insurance.”
The tax on comprehensive plans was vocally opposed by the nation's most prominent unions, including the National Education Association (NEA), the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), and the Service Employees International Union (SEIU).
These organizations threatened to withhold their support of the entire Obamacare law unless the excise was removed, but a compromise was reached in January 2010: the premium thresholds at which the tax would kick in were increased, particularly for early retirees, workers in high-risk professions, and those living in high-risk areas. In addition, implementation of the new tax was postponed from 2013 to 2018.
Under the terms of the compromise, the unions agreed to endorse the overall law, though they remain ambivalent about this particular provision.
For example, “SEIU opposed this tax, and our strong advocacy enabled us to postpone its effective date and include safeguards to reduce its impact on SEIU members and all workers,” according to an FAQ posted on the SEIU's website. “No worker will pay the tax directly; if owed, the tax will be paid by health insurance companies or health plan sponsors.”
But as Ellis notes, insurance companies will surely get around the tax by simply charging higher premiums, making health care more expensive for the employers who provide comprehensive insurance plans.
“And that will certainly affect families making less than $250,000,” Ellis says, referring to President Obama's oft-repeated pledge not to raise taxes “a single dime” on those households.
While the tax on “Cadillac plans” might not technically violate that pledge, since it will only only be imposed on the middle-class indirectly, Ellis says it does “put the lie” to another one of the president's promises: that if workers “like” their employer-provided health care plans, they will be able to keep them.
“Well, no you can't,” Ellis warns. “Because by the time the employer mandate has done its work, and all the employers have dumped their health insurance, and by the time the 'Cadillac tax' does its work, if your current plan is too expensive you won't be able to keep it.”
These days, it's not just conservatives sounding the alarm over these measures. The United Union of Roofers, Waterproofers, and Allied Workers – which initially endorsed Obamacare – has recently called for the law's total repeal over these same concerns.
Reach Eric Giunta at firstname.lastname@example.org or at (954) 235-9116.