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The Inequity of a Health Plan Tax
Whether a plan's considered a Cadillac or a Honda, taxing health plans is an inequitable strategy for bringing down health care costs. In the short run, the excise tax may seem like a useful way to generate funds to cover health reform. But such a tax perverts the marketplace and creates inequities for both workers and the employers who sponsor health insurance.
Workers' wages have been relatively flat for the past several years, as employees have traded off cash compensation for benefit compensation - in particular, health benefits. The difference between workers' earnings and health benefit costs has increased 150 percent over the past eight years while wages have increased only 37 percent, according to Towers Perrin's 2009 Health Cost Survey.
As Helen Darling, President of the National Business Group on Health, has said, "Workers have been giving their raises to the health care industry." Taxing a high-cost health plan could negatively impact middle-class workers who have increasingly traded off cash for benefits over the past eight years.
The other side of the coin is employers, who need to attract and retain a talented workforce. Benefits are a key tool in an employer's arsenal for building a skilled team.
The health benefit tax may be aimed at Cadillacs, but it could backfire and create a Corvair of a health plan. And that was one dangerous automobile.
By
Jane Sarasohn-Kahn
|
September 21, 2009; 5:08 PM ET
| Category:
Health Care Reform
,
Insurance
,
Taxes
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Posted by: zosima | September 23, 2009 3:17 AM
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"The other side of the coin is employers, who need to attract and retain a talented workforce. Benefits are a key tool in an employer's arsenal for building a skilled team."
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With the glut of workers created by the latest economic downturn, this statement is no longer true. We can expect a further depression of wages.
I've considered Cadillac plans given to autoworkers to be a tax dodge. You don't need attractive benefit plans to hire autoworkers,as they are people who are minimally educated and a dime a dozen. But by giving expensive benefits, companies currently avoid all of the taxes they'd otherwise be paying on wages(FICA, federal, state, futa, etc. taxes). Since unions often take care of the benefits, it's no wonder they're fighting this idea of taxing benefits....but it would be fair. Individuals purchasing insurance aren't afforded that same tax break.
Posted by: boosterprez | September 22, 2009 6:45 PM
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I swear, every one of these opinions sounds like it is straight from the mouth of a lobbyist.
To your particular argument: We can't make an omelet without breaking a few eggs.
Or to apply a health care metaphor...This provision might not taste good to Organized Labor but if they don't take their medicine, they're soon going to be back at the doctor in much worse shape.
In other words, which is worse,(1) That they lose some benefits earned in the past, (2) or that they keep giving away their raises for no benefit?