An interesting aspect of the upcoming health care reform is how expansive it is. Health care really touches and affects many different parts of our lives. It is going to be an interesting time in the next few months and years to see how this ultimately shapes our health care consumption as a nation.
At the same time, we are seeing how these new rules affect different segments of the population BEFORE they even begin. Take the Obama “Cadillac Tax” which is expected provide $80 billion to the federal government over the next decade, according to a Congressional Budget Office report issued in May.
Here is how the Cadillac tax works: If an employer-provided health insurance policy costs more than $10,200 for an individual, the employer will be taxed 40%of what’s considered an “excess benefit,” according to insurer Aetna. The tax kicks in for $27,500 in spending on family coverage. So any amount above these figures, the employer must pay an additional $.40 on each $1 they provide. This cap is in place to limit the number of first dollar and immediate benefit plans available.
The thinking is that having more “skin in the game” from consumers will result in more cost conscious decisions. Also, by taxing high cost plans, the penalty will create an incentive to scale back excessive spending by employers.
What is interesting to note is that unions and municipalities are the employers that most often offer these “Cadillac” plans and may be most affected by the tax.
If you work for a city, government, or union, you may see a larger change in your benefit choices in upcoming months as some of your options are cut to fall under these guidelines. It is important to note that the figures used ($10,200 for an individual) is the actual cost of the plan, not just the premium you pay out. So if your contribution is only $100/month, the total count is not $1,200. Rather it is the $1,200 + whatever your employer spends that counts. Many people do not realize the extent that their insurance is subsidized by their employer. In this example, if your employer pays 90% ($900/month) and you pay 10% ($100/month) it is actually over the “Cadillac tax” limit of $10,200. The most obvious solution is to get the premium under the $10,200 threshold, which will probably mean increasing your deductible or cutting benefits like glasses and dental coverage.
So now the only question is, “How did the term Cadillac become synonymous with good benefits?”