Taxing more generous healthcare plans as a means to pay for costly healthcare legislation pending in Congress is generating widespread skepticism not just on Capitol Hill, but in the provider industry as well.
Tax on most generous insurance plans draws ire
A so-called “Cadillac” tax on high-cost insurance plans is just one of many proposals on the table to help offset the cost of healthcare legislation whose price tags are just under a trillion dollars. The House has been considering this option along with a surcharge on the wealthy and some other ideas to bend the cost curve on reform, and one Senate reform bill has a proposal on the table.
The provision under consideration in the Senate Finance Committee, for example, would impose a 40% excise tax on insurers for plans that exceed certain cost thresholds, specifically $8,750 for individual plans and $23,000 for family coverage, beginning in 2013. Certain people with high-risk professions who need more costly plans to pay for more frequent doctors’ visits would be exempted.
“While we don’t have a position on the excise tax, we do believe there needs to be shared responsibility by all” in crafting health reform, said Alicia Mitchell, a spokeswoman for the American Hospital Association.
Opponents argue that such a tax will trickle down to middle-income families in the form of higher premiums. “This is the opposite of what healthcare reform is supposed to accomplish. Unless policymakers focus on the underlying medical cost drivers,” reform won’t be sustainable,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans.
The proposal has also generated naysayers outside of Capitol Hill. “Taxing higher benefit insurance plans seems totally ridiculous to me,” said Bernard Emkes, medical director of managed care services at St. Vincent Health, Indianapolis.
The message seems to be that “we want everyone to be insured, but not too insured,” Emkes said. “What is that about? If you can afford to upgrade insurance coverage—why not? This seems like a desperate government money grab to me, to pay for an expensive program with no funding.” It’s also unclear what the definition of “high-cost plans” will be and which ones will get taxed, he added.
Hospital coverage, a core benefit in health coverage, is unlikely to be affected, according to Chip Kahn, president of the Federation of American Hospitals. “Benefit design is what makes these (high-cost) plans expensive: low coinsurance and deductibles, dental and vision, sports clubs, spending accounts,” Kahn said. “Coverage for hospital care is not what defines a high-cost plan generally.” In the event this tax passes through to the person paying the premium who then decides to lower the value of the plan to save money, that person is going to adjust the drug benefit or drop the coverage on the sports club, but that person’s not going to drop hospital coverage, he explained.
Not everyone in Congress is fully sold on the idea of using this as a solid revenue source.
“The views are mixed on how this has to be paid for,” said Rep. Eliot Engel (D-N.Y.), who sits on the House Energy and Commerce Committee. It’s likely that this excise tax may be combined with other options, such as a surcharge on the wealthy. Engel said he’d favor a surcharge on people who make $1 million a year or more, “but I’m open to other ideas.”
Rep. Robert Andrews (D-N.J.) said an excise tax on insurance companies “would not be my favorite revenue source,” but that he would generally support anything that would lower costs in the bill.
House Majority Leader Steny Hoyer (D-Md.) would not say whether a final House bill would include a tax on high-cost insurance plans. “How to pay for this,” Hoyer said last week, “is still in flux.”
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