I like to think that very few people despise Obamacare more than me.
I don’t like Obamacare because it’s a fiscal boondoggle.
I don’t like Obamacare because it’s bad healthcare policy.
I don’t like Obamacare because it generated an embarrassingly bad decision by the Supreme Court.
I don’t like Obamacare because it is driving people out of the labor forceand into government dependency.
I don’t like Obamacare because it has increased corruption in Washington.
And I don’t like Obamacare because it further enriches and empowersWashington’s political class.
But I also like being honest and that means I’m willing to acknowledge that there’s one small part of Obamacare that will have a positive impact.
More specifically, the so-called Cadillac tax on expensive employer-provided health plans will slightly reduce the distortion in the tax code that encourages over-insurance and exacerbates the healthcare system’s pervasive third-party payer problem.
Indeed, we’re seeing some signs of this already, even though the tax preference isn’t capped until 2018. Here are some excerpts from a story published by Fox News, starting with a description of the law.
…companies desperate to avoid a 40 percent ObamaCare “Cadillac tax” are finding ways to shift the costs to workers. The so-called “Cadillac tax,” now four years away, will affect health plans that spend more than $10,200 per worker. “The excise tax, when it hits in 2018, will affect both employers and employees,”said Brian Marcotte, president of the National Business Group on Health.
Allow me to make an important correction before sharing other parts of the story.
Companies aren’t shifting costs to workers. The money currently spent on health insurance policies is part of total employee compensation.
Think of it this way. If a company hires you for a salary of $50,000 and also includes a $10,000 health insurance policy, what’s your total compensation?
If you give an answer other than $60,000, you’re either very bad at math or you have the logic skills of a politician.
So the story should have stated that the Cadillac tax is merely making workers more aware of costs that already exist.
Thanks for letting me vent. Now back to our main point, which is that the Cadillac tax discourages overinsurance, and this is already leading to some positive changes in the marketplace.
Employees will get incentives to reduce costs through such arrangements as wellness programs, including losing weight or stopping smoking. Meanwhile, employers are shifting workers into plans with higher deductibles, just as ObamaCare does in the health care exchanges, and using health savings accounts to help defray the costs.
I’m particularly happy that employers and employees are shifting to plans with higher deductibles. As I’ve explained before, health insurance should cover large, unanticipated costs, such as the onset of cancer or getting injured in a car wreck.
But it shouldn’t cover annual checkups, elective surgery, and other routine and/or predictable expenses.
And we have one other bit of good news. The tax isn’t going to raise nearly as much money as the politicians wanted!
The “Cadillac tax” was originally intended to take effect sooner, but unions and other groups convinced officials to delay it until 2018, reducing the anticipated income from $137 billion to $80 billion over ten years. But many analysts predict it will be far less than that. Henry Aaron of the Brookings Institution said, “before then, it’s expected that most of the businesses that offer that form of insurance will back off and make the insurance less generous, so the tax won’t bite.” …if employers are able to avoid it and less than expected is collected, ObamaCare could fall tens of billions short in paying for itself as promised.
I should hasten to add, by the way, that I’m glad that Obamacare isn’t paying for itself since that simply means lots of taxes to accompany all the additional spending.
I’d be even happier, of course, if we could figure out how to get rid of all the spending as well.
