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Obamacare tax on health insurance will affect most plans over time, reducing healthcare

by | Oct 2, 2013

By Jennifer Popik, JD, Robert Powell Center for Medical Ethics

Pro-abortion President Barack Obama

Pro-abortion President Barack Obama

This week, amid the government shutdown and the rollout of the Obamacare state health care exchanges, the health care law is drawing critics from all corners. In particular, organized labor, an initial supporter of the law, is now at odds with a provision of the law that will tax insurance plans less like to deny life-saving medical treatment and other health care – plans that they have long provided to attract members.

This tax on health insurance plans is a major component of the health law. The primary purpose is to discourage businesses from providing what Obamacare advocates view as too much health coverage. Starting in 2018, there will be a 40 percent tax on insurers — which would be passed on to employers — for any health coverage that goes beyond $10,200 for individuals and $27,500 for families.

According to a September 30 article in Politico “How Obamacare affects businesses – large and small” by David Nather, we learn

“For one thing, the thresholds were set in 2010, and even though the law has a method for raising them if there’s a lot of growth in health care spending, employers are still concerned that they’ll get busted for offering fairly standard plans.”

Although the tax does not begin until 2018, companies are already cutting back health insurance in anticipation of it. The consulting firm Towers Watson this fall surveyed 420 employers and found that more than 60% of large employers’ active health plans will be subject to the tax, unless the plans are changed. They expect plans to begin scaling back primarily in 2014 and 2015.

What is worse, the thresholds will not rise enough to account for medical inflation. As noted in Nather’s Politico article,

“[Thresholds will] be linked to the increase in the consumer price index, but medical inflation pretty much always rises faster than that. Think of the Cadillac tax as the slow-moving car in the right lane, chugging along at 45 miles per hour. It may be pretty far in the distance, but if you’re an employer and you’re moving along at a reasonable clip in the same lane — say, 60 miles per hour — and you don’t slow down, you’re going to run smack into it.”

In September 20th Chicago Sun-Times article, “Employers shifting costs to avoid Obamacare ‘Cadillac tax’” Francine Knowles writes

“Although the tax doesn’t start until 2018, employers are now ‘passing the cost onto employees in higher premiums and more cost sharing or requiring higher deductibles and copays’ and scaling back offerings, said health policy consultant Julie Piotrowski.”

Knowles described mounting labor union opposition:

“Labor unions, which are pushing to have the tax eliminated or the threshold raised, fear workers will unfairly feel the brunt of the tax and take issue with the ‘Cadillac’ reference. ‘It’s extremely misleading,’ said Anders Lindall, AFSCME Council 31 spokesman in Chicago. ‘Far from being excessive, our plans are reliable, strong and safe. The tax punishes workers who have made sacrifices in pay to trade off for health security for their families. We shouldn’t impose a negative incentive against strong health plans.”

These health insurance plans are ones that enable people to have freer access to life-saving medical treatments and procedures that a doctor and patient deem advisable to save that patient’s life or preserve or improve the patient’s health. These were plans that were used to attract employees, and ones that both employers and employees deemed worthwhile and valuable.

Thanks to this tax on health insurance, Americans can expect that plans that allow more access to healthcare will begin to disappear. There is evidence this is happening already…..and implementation is only in the beginning phases.

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Categories: ObamaCare