More coverage on Kerry's prosal to tax high end policies

[karynnj]

All pretty favorable

Here's the NYT

A proposal by Senator John F. Kerry, Democrat of Massachusetts, would impose an excise tax on the insurers that issue policies like Goldman’s, with the expectation that the insurers would pass along most, if not all, of the cost to employers who buy the plans.

<snip>
Asked if Congress would tax high-end plans, Mr. Conrad said: “I think we’ve got to. Again, virtually every economist that’s come before us has said you’ve got to reduce that tax subsidy as part of an overall strategy to really contain costs.”

An aide to Republicans involved in the Finance Committee negotiations said the idea was “on the table in discussions as a serious effort by Senator Kerry to restart the conversation on bending down the cost curve.” Aides to Senator Max Baucus confirmed that he, too, was considering the proposal, and House leaders said they were as well.

http://www.nytimes.com/2009/07/27/health/policy/27insure.html


Here's the Wall Street journal (that credits it to John Kerry and others - I think the "and" others means they think it is a solution that will work.)

"A proposal to tax insurance companies on their most-expensive policies appears to be gaining momentum in Congress and the White House, as lawmakers search for politically acceptable ways to fund a health overhaul.

David Axelrod, senior adviser to President Barack Obama, suggested on CNN's "State of the Union" Sunday that the president found the idea "intriguing." "That was our big concern, that we not impose vast new burdens on the middle class," Mr. Axelrod said.

Other comments by influential Republican and Democrat lawmakers suggested that the idea has broader appeal than some other funding plans that have been floated, such as taxing individuals on their employer-provided health plans, or imposing a surtax on the wealthiest Americans.
<snip>
In recent days, Sen. John Kerry (D., Mass.) and others have floated the idea of targeting high-end insurance plans as a way to help cover the costs of a health-care overhaul. Mr. Kerry has publicly offered few specifics, but congressional staffers have suggested that options being discussed include taxing insurance companies or employers that offer such plans. It wasn't immediately clear how much tax revenue such an approach would generate

http://online.wsj.com/article/SB124863649016781945.html

[wisteria]

1. I have been following this new development for a couple of days.

I saw something on it last week and then didn't see anything else until the other day. It is good to see Sen. Kerry receive some credit, but still, the WSJ can't bring themselves to give him all the credit he deserves.

[Inuca]

2. Embarassed to ask, but

what does taxing these high-end policies actually mean? I assume these are policies that cover everything under the sun for a comaparatively low cost, right? Or are they proportionally pricey so the insurance companies get a windfall because they pocket the money if the policy is not used?

[karynnj]

3. The NYT article describes them in the first couple of paragraphs

They are gold plated policies that some companies buy for executives that include essentially anything and have no cost to the recipients. On any insurance, the policy is priced based on the expected cost and a profit margin. The companies keep the premiums regardless of the actual costs.

[Inuca]

6. I read the article AFTER

I posted my question :blush:, very useful.

[karynnj]

4. The Heritage Foundation is concerned enough they attacked Kerry's proposal dishonestly

They say that Kerry's plan will raise everyone's insurance because they ignore that he is not taxing the entire premium, but just the portion that is above some threshold. Their alternative - just to cap the amount that is taxfree would in fact do the same thing Kerry's proposal does, if you assume that the entire tax is paid by the policy holder.

They also very disingenuously say that it would apply just to private plans and not the public option. This is because they are again ignoring that Kerry's plan taxes only the amount above the average cost. The very design of the public plan means no public policies would be above the average cost. There is no intention of the public plan having gold plated options.

I hate to link to RW sources, but Heritage garbage tends to become talking points - and here they are intentionally wrong.
http://www.heritage.org/Research/HealthCare/wm2561.cfm

[karynnj]

5. Additional comment - there is a lot of redefining the Republican alternative as well

McCain proposed totally eliminating the tax break for employer paid insurance. This may be a game, where they are ending up near where Kerry was - accusing Kerry's plan of the flaws that there original plan had - and his doesn't.

Here's another link that speaks of where people really stand on this:
http://www.politico.com/news/stories/0709/25449.html

[karynnj]

7. A positive article in the washington Times!

This actually is a good article with some nice explanations and quotes.

http://www.washingtontimes.com/news/2009/jul/29/tax-eyed-on-insurers-top-plans/

[beachmom]

8. A critique from Time magazine:

http://www.time.com/time/politics/article/0,8599,1913147,00.html?iid=tsmodule

The idea for an excise tax on insurers was put forth by Finance Committee member Senator John Kerry and modeled on a similar 1994 proposal from Senator Bill Bradley. President Obama has said as recently as July 22 that he's open to capping the tax benefit on health plans in some form.

It may seem like a neat solution to a thorny political problem, but as with every aspect of health reform, it's not nearly that simple. For starters, most large companies (1,000 employees or more) are self-insured, with a private health-insurance company merely acting as the benefits administrator. In these cases, Kerry's proposal would levy the excise tax directly on employers, whose extra cost burden could be (and many say most certainly would be) passed onto employees in the form of higher contributions to premiums, higher deductibles and higher co-pays. "It is not a tax on insurers," says James Klein, president of the American Benefits Council, which advocates for employer-provided benefits. "It is a tax on employers and, therefore, workers."

...

"If people think these Cadillac plans are primarily covering wealthy executives, they are mistaken," says Tom Billet, a senior health-benefits consultant for Watson Wyatt, a corporate consulting firm. In reality, many more of the most expensive employer-based health-insurance plans cover people like the families of New Hampshire state employees who, according to the Boston Globe, have policies worth $20,400 per year. (The employee contribution is $60 per month.)

...

Municipal unions, which in recent years have had more success winning premium health benefits than wage increases, are incensed at the notion that their members could get hit by a new health-insurance tax, even an indirect one. "In our judgment, we think it's inequitable to tax individuals because of who they work for, what they do or where they work," says Chuck Loveless, legislative director of the American Federation of State, County and Municipal Employees. Of the Kerry excise tax proposal, Loveless says, "We're looking at it very closely and we're trying to calculate the cost of excise tax on our plans, but I do know it's going to hit some union plans."

Despite whatever opposition new benefits-tax proposals might face, it's unlikely health-reform legislation will emerge without them.

All of this is really above my pay scale. But the fact is a lot of union members have much better health insurance than most of us do. If this tax goes through, that may affect their calculus on how to negotiate contracts going forward.

[karynnj]

9. This is people will lose their farms due to the DEATH tax redux

The limits where you start paying under what I have read of Kerry's proposal are between $25,000 to $40,000. It is also clear that the tax is applied only to the part above the threshold. Here, it is clear they worked to find a union plan that goes above the lowest limit they can find. Now look at their example - it is $20,400. It would be affected only if the threshold was moved down to $20,000.

Even then, they have a plan where the top $400 is taxed - and the recipients are getting $20,000 in compensation tax free, when the average breaks those of us lucky enough to have employer paid insurance get is closer to $12,000 - $$16,000. Not to mention, I am jealous that they pay only $60 a month. What this is is an attack on the plan by trying to make more people think it will hurt them.

They do not stop to consider that the people with the untaxed $12,000 or $16,000 plans pay more on copays, medicines and other charges - much of which is paid with income that was taxed. In essence, this is capping a tax deduction that has helped the more affluent more than those lower on the income scale. Bill Bradley, my former Senator, was a liberal, and a very good Senator.

This is the same strategy used on the estate tax where there were all these stories of how people would lose farms and small businesses in the family for decades. Yet, one politician -maybe Kerry, I am not sure - spoke of no one being able to find even one farm where this would have happened. Here, I am suspicious because the writer obviously looked for the highest cost of a union contract she could find and failed to find one. In addition, it is written so the range Kerry is speaking of was paragraphs away and written so one would think it would be affected - when it doesn't meet the lowest possible threshold. It also ignores the fact that the tax, I think, is just on the portion over the limit.

This is also not something completely outside the box. Every year, I still get a W2 from AT&T where I retired from in 1998 for something like $6 or $7. The reason is that I still get life insurance that was determined by the salary I had when I left - it is marginally above the amount that is tax free - so that amount is income I pay taxes on. I know AT&T is self insured on health care and I assume they might be on life insurance as well.

I think the concern about companies that self insure is silly as well. On the concern that they would pass the tax through to the recipient, I don't see why an employer who buys insurance that is taxed would not have a significant chunk of that tax passed to them meaning there is little difference. Elsewhere, there was a concern that if they were self insured there would be no "price tag" is not true. They have no trouble assigning a price for COBRA. (I paid the COBRA price for a daughter who took a year break from college, who had pre-existing conditions - so this was the best (though expensive - we were super happy when she went back to school) we could do to insure her. AT&T has good insurance, but the individual policy under COBRA was I think around $800 a month. Far below this threshold.

[beachmom]

10. Thanks, good response. I think it is good to get contrarian opinions

in here and see what the response would be. That way, we all know the arguments.

[karynnj]

11. I agree completely

I know my opinion has always become more informed after looking at the breath of articles and opinions others bring here. That is why this is my favorite place on the web. (other than the obvious that there are lots of nice people here.)

The Time article is interesting because it addresses the idea in detail. The fact that there are so many articles - and ones looking for flaws, has to be a sign that it is being taken very seriously.

I found the heritage one interesting because of their sleight of hand. They criticized it for the real failings of McCain's plan pretending Kerry is taxing all insurance plans, while redefining the Republican plan. McCain's plan took the tax exemption from all plans. They now speak of "capping" the amount that remains untaxed as the republican plan.

In essence, they are aligning themselves with the rough equivalent of Kerry's plan done via caps on what is tax free rather than an excise tax on that same portion. Meanwhile, they are distorting Kerry's proposal to be equivalent to McCain's failed politically dead plan that taxes all plans.

(The good news is that it means they like the plan - I would not be surprised if a Republican sponsors a plan to do this via capping what is tax free.)