HR: Health Care Reform- Excise Tax
Last week our blog focused on the "pay or play mandate" option of health care reform and the possible effects it could have on employers and the economy. This week we are looking at another option brought to the table by the Senate Finance Committee- imposing an excise tax on high priced, "gold plated" health insurance plans. The tax is intended to help raise money for health care reform while also helping to slow the rate of health care costs by discouraging insurance coverage that is overly generous and wasteful.
Under the Baucus plan (Senator Max Baucus) the excise tax would be imposed on health insurance companies and third party administrators that offer health insurance plans that exceed a specified amount. The bill proposes a 35% tax on annual premiums in excess of $8000 for individuals and $21,000 for a family of four. The plan is meant to discourage the "Cadillac" insurance polices that have exorbitant participant costs. Plans such as the executive medical and dental program at Goldman Sachs, which is said to cost over 3 times the national average and has no co-payments, no deductibles, no limits on doctors or procedures and no requirements for referrals.
Critics of the plan argue that the tax could affect a large number of expensive plans that aren't lavish, but are actually high cost plans for unavoidable reasons. Higher regional costs, high risk professions (coal miners, firefighters) and continued coverage to early retirees are all examples of expensive plans that could be affected by the tax. Add in the skyrocketing costs of benefits and the proposed tax could hit far more health plans than expected.
Supporters would argue that this plan has the potential to raise $90 - $180 billion in revenues over the next 10 years! While taxing insurers that offer these very high cost, wasteful plans could obviously provide a significant source of financing, does this plan help in any way to get to the root of the problem? Does it actually cut health care costs or change the price of health care at the local clinics?