Health Reform Update: Kill the Tax on Benefits

[Hannah Bell]

This is from the Union that organized the Republic Doors & Windows strike: UE

Among the details of the evolving Senate health bill are a number of troubling provisions, and at the top of the list is the disgraceful inclusion -- up until now -- of a new tax on the value of health insurance provided by the employer. This would compel employers to add an amount of money -- over some set point -- to an employees annual gross income statement as if the value of health insurance was the same as wages or salary earned through the year.

For the majority of workers, if the value of your health insurance exceeds $21,000 for family or $8,000 for a single person annually, then any amounts beyond that would presumably be added to your W-2 slip for that year, as if the additional amounts were wages.

While many workers do not receive employer paid insurance plans of these values, given the zooming cost of insurance and it will be just a few years until the tax would be levied on ordinary workers. All research points to the fact that as many as 30 percent of all current working people would today be subject to some additional taxes if the $21,000/$8,000 per year amounts were to be enacted.

This merely adds insult to injury; since Congress will not put price controls on the skyrocketing costs of health premiums, supporters of this tax know full well that in just a few years workers will be paying large chunks of new income tax because of this.

The Senate Democratic leadership -- the primary promoters of the current legislative push -- refuse to even consider outright price controls on health insurance premiums, even though there is flagrant and obvious price fixing and market manipulation by insurance companies.

While overall consumer inflation has hovered in the 3% to 4% range "officially" -- and working people regularly see much higher increases in the cost of living -- the insurance companies have increased health insurance costs by astronomical percentages. While "official" health insurance cost increases are recorded at about 7 percent annually, it is commonplace to find annual increases as high as 30 percent in one year. With no insurance competition most employers or customers must either pay the drastic increases or drop the coverage.

If this scheme sounds crazy, and makes you angry, it should. Only members of the U.S. Senate could possibly think that such an idea was legitimate. Senate supporters of this rip-off are none other than the same Democrats who refuse to put the tax burden where it belongs, on big business and the wealthy. In their minds workers with comprehensive company paid health insurance benefits are somehow the recipients of "Cadillac" benefits.

It is hoped that progressive Senators will prevail and see the disgraceful new tax scheme removed from the Senate bill by the time it is passed. There is no justification for it. In recent years the labor movement -- our union included -- have fought some hard political battles to stop corrupt politicians from levying taxes on health benefits values as well as the values of our pension benefits. For those among us still in possession of a true pension, a defined benefit pension, at least. We will win this battle as well.

See the comments of Vermont Independent Senator Bernie Sanders on killing this very bad idea. Our fellow union CWA has also produced a fact-packed sheet with all the details needed to diagnose this bad idea.

UE members are asked to call both of your Senators via the Capitol switchboard at 202-224-3121. Tell them to kill the benefits tax.

To find your Senators visit the UE Political Action web page. Look to the lower right for the "Be Heard" section and use your zip code to find your Senators.

http://www.ueunion.org/ueaction.html

http://www.ueunion.org/ueactionupdates.html?news=525


Health care legislation under consideration in the U.S. Senate would raise $149 billion over ten years by imposing a 40 percent excise tax above certain thresholds on insurance company health plans and self-insured plans offered by companies to their workers. This tax would have a dramatic effect on those plans forcing steep reductions in benefits, shifting of costs to workers and a significant increase in taxes on millions of middle-class families.

Contrary to claims by proponents that it will affect only “Cadillac” health plans, like those enjoyed by Goldman Sachs executives, according to Joint Committee on Taxation(i) data the excise tax will:

Affect 19 percent of workers with employer-sponsored health coverage in 2016.

Affect nearly 25 million households(ii) in 2019, including one-fifth of middle-class households making between $50,000 and $75,000.

Affect about 25 percent of health plans by 2019.

Cost affected households an additional $7,500 in taxes on average between 2013 and 2019, or more than $1,000 a year.

In 2019, cost affected taxpayers who are millionaires an extra $2,600 in taxes and those making between $50,000 to $75,000 an extra $1,100 in taxes, but the wealthy taxpayers’ income will be at least 13 to 20 times greater.

Be a tax increase of 0.1 percent of income for those households affected that make more than $1 million a year and be a tax increase of 1.4 percent for those households affected that make $50,000 to $75,000.

http://www.healthcarevoices.org/pages/impact-of-the-excise-tax-on-the-middle-class

[laughingliberal]

1. I advise everyone to write their reps in the House and urge them to fight this in conference. nt

[Hannah Bell]

2. kik

[maryf]

3. Thanks

Big K&R

[johnaries]

4. Bull. Shit. Why do you keep posting lies?

[laughingliberal]

5. Oooh! Persuasive and Compelling! Not. nt

[MadHound]

8. What lies?

This seems pretty straightforward to me. Information is from government sources, the JCT, which is dominated by Dems. The other information comes from *gasp* a union.

The definition of a Cadillac plan in the Senate version is based on the size of the premiums that you and your employer pay, total, excluding deductions. Eight thousand and over, and that plan qualifies as a Cadillac plan.

These plans are actually quite common in union negotiated contracts. In some cases, like say teachers, these sort of insurance packages are part of the perks laid out in lieu of being in a lower paid profession.

This would effect a lot of people adversely, like myself. I'm a teacher, and frankly I can't afford to pay out an extra thousand plus dollars a year in taxes, I'm sorry, I don't make that kind of money.

So rather than including provisions that would balance the budget of this bill on the backs of people like myself, let's rather have the wealthy start paying their fair share instead. After all, it's not like they haven't benefited from years of tax cuts and our increasing propensity to balance all fo the budget on the back of the poor, working and middle class in this country.

[Name removed]

13. Deleted message

Message removed by moderator. Click here to review the message board rules.

[laughingliberal]

14. I've read the 'fucking bill'. I've read every bill passed out of every committee

The tax is based solely on how much the insurance company charges for the premium. A plan for an individual that costs $8000 per year or for a family that costs $23000 a year has an excise tax imposed on it. It does not matter how good the coverage might or might not be, just the fact that it costs a lot. Many people in my age group pay that much for pretty average coverage. Union workers who have very good coverage generally got that coverage in contract negotiations in lieu of higher pay or better raises. Now, they gave up better pay or better pay increases in order to feel more secure about their health care needs and they get a tax that further reduces their income. It is a tax on working and middle class Americans. Your personal insults do not change the facts that this is not a tax on the "Rich" Hello!

[johnaries]

19. Yes, I've heard that argument. But are you paying that premium now?

The entire argument is based on premiums going up in the future. And the purpose of the bill is to keep those premiums from going up.

Rather than "kill the bill based on a very unlikely scenario that the bill itself is trying to avoid, why not give the bill a chance to avoid the scenario - and if it doesn't THEN lobby to raise the requirements?

You are arguing on a potential that will likely never happen.

[laughingliberal]

21. No we finally had to drop the policy cause we chose to try and keep our house

But there is nothing to bring the premiums down in this bill and, regardless, taxing workers who got good health care benefits by settling for lower raises is the wrong way to raise the revenue. I prefer the provisions in the House bill for raising the revenue needed and I am writing the reps there to encourage them to fight for that in conference. There is no need to pay for this bill on the backs of the working and middle classes.

[Hannah Bell]

29. a "potential" that any number of observers, including CBO, call a near-certainty.

"why don't you just *try* the piece of shit & see if it disagrees with you?"

taxing a health plan is anti-worker bullshit.

[Hannah Bell]

16. "cadillac" plans = union.

[johnaries]

20. Nope! Go back to beginning. Do not pass Go, do not collset $200.

[Hannah Bell]

22. which is why unions are campaigning against the plan to tax.

you can bluster & ad hom all you want, but the tax on so-called "cadillac" plans is a new tax on workers, not on "the rich".

It's also a back-door way to force people into cheaper plan with less coverage -- the "cost-saving" feature = cutting care.

[laughingliberal]

23. Cute but wrong. The unions are universally opposing this tax because it is aimed straight at their

members. The House bill raises money by taxing the wealthiest Americans who have all had tax cuts in the last decade. Sorry, I prefer that revenue source.

[MadHound]

17. I have educated myself, I thought that I sufficiently demonstrated that in my earlier post

You know, the one where I gave you the Senate definition of the bill. Here, let me repeat it for you again:

A "Cadillac" plan, as defined in the Senate version of the bill, is a plan where the total premium paid into the emmployee's insurance plan by both the employer and employee meets or exceeds $8,500/year.

That is the reality of this Senate version, you can go look it up for yourself if you want:

<http://thomas.loc.gov/cgi-bin/query/F?c111:5:./temp/~c111gpvR2Q:e2104617:>

This is not helping the middle class. Again, my own personal example, I'm a teacher. As part of the benefits paid out to me, again, in lieu of getting decent pay, my union negotiated insurance plan is a fairly decent one, and yes, the total amount of money paid into it by my employer and myself is over the $8,500 limit. Thus I will have to pay out over $1,000/year in taxes on this decent, not extravagant, decent insurance plan, coming out of my rather modest salary.

I simply can't afford that, nor can other teachers or most union members.

So please, now that I've backed up my assertions (with the actual bill mind you), tell me and the OP how we're lying. Back up your hot air with actual facts, no just simple knee jerk assertions on your part.

[ljm2002]

33. And you should educate yourself...

...about the use of language and framing.

The term "Cadillac plan" is used intentionally, just to get that reaction that it is somehow a gold-plated upscale benefit. Certainly it is, compared to what many get. But again, that is exactly why they are using it to divide and conquer: get the folks on the bottom to be angry at those on the next rung up because they actually had the temerity to negotiate good benefits for themselves, often in return for taking no raises.

Meanwhile, those at the top just laugh and laugh as there are more and more rungs put between them and the lower levels who are fighting among themselves. They foment that jealousy, and they turn around and become enraged when someone suggests that they, they rich, might throw a little more into the pot so we could all have decent benefits.

It's what is left of the middle class who will pay for this, with the tax on their oh-so-cleverly-named "Cadillac plans". Meanwhile the upper crust like the despicable Rush Limbaugh have Rolls Royce insurance and no one makes a peep about it, because that's just the way things are. God knows we shouldn't ask them to dig deeper into their pockets for the greater social good, no sir, not when we can get the chumps to pay up.

And you are just playing right into it, as you practically froth at the mouth and call people with a different view "ignorant children". As if your comments could be taken as teaching anyone. NOT.

[harun]

6. I hope they tax the shit out of plans costing that much.

[Ms. Toad]

9. My plan costs that much - not because it is a luxury plan

but because we are in a small business and it costs that much to purchase risk based coverage (the only kind available to smaller employers).

Bigger employers whose premiums are that high are a different story - but if you haven't shopped for individual coverage for a 40-50 something individual who is uninsurable, you might want to try.

[MadHound]

12. Really, gee thanks for wishing economic and hardship on myself and other working stiffs

I'm a teacher, and one of the perks of the profession is a health insurance plan that qualifies as a "Cadillac" plan, one that is designed to reduce the sting of not getting paid jack shit for what is arguably one of the most important jobs in our society.

I don't have the kind of plan that people at Goldman Sachs get, but something rather more modest. The problem is with how a Cadillac plan is defined. Under the Senate version, it is defined on the amount of the premium paid by you and your employer, namely $8,000 annually, minus deductions. While these kind of premiums do get you a plan that is relatively decent, it is nowhere near the no co-pay, no-deduction plans that the term "Cadillac" is designed to bring to mind.

So, why should I, a low paid teacher, have to balance this so called "health care reform" budget on my back. If this bill goes through, I'm looking at having to shell out an extra thousand plus in taxes each year. Can you afford that? I certainly can't.

Rather than going with this sort of proposal, let's instead simply tax the wealthy directly. That way those who need to pay their fair share do, while the rest of us catch a break.

[Hannah Bell]

18. $700/mo part paid by employee, part by employer = "that much".

guess we know which side you're on.

[Ms. Toad]

27. The point is that the definition of "cadillac" should be based

on what is covered, not on what is paid to obtain that coverage.

Smaller employers will pay far more for the same coverage than larger employers because smaller employers premiums are based on the perceived risks associated with their individual employees; larger employers (over 50) are based on an average pooled risk and are much lower for the exact same coverage.

In other words, a tax on Cadillac plans should be based on owning a Cadillac - not on owning an Escort that you/your employer purchased at Cadillac prices (since the plan was not available to you at Escort prices).


I am in favor of grabbing the progress made by these bills - as ugly as they are, they are a significant step in the right direction - but I hope this particular provision will be amended because it discriminates against employees of smaller businesses who are far more likely to be hit by this tax regardless of how good their coverage actually is. Very few smaller employers actually provide access to health care for their employers - this further discourages them from offering coverage (or offering decent coverage) because the plans cost so much and are likely to end up being a taxable benefit.

[Hannah Bell]

28. it has to be based on $$ to tax. why should *any* workers be taxed

on the value of their health insurance?

it's perverse, & provides perverse incentive.

[Ms. Toad]

30. I don't necessarily agree it should be taxed - BUT

if it is going to be taxed, it needs to be based on what is covered - not how much is paid for the coverage. It wouldn't be that hard to figure out a way to assign an appropriate tax value - even triggering tax eligibility based on kind of coverage provided and then basing taxes for those required to pay them on premiums paid would be better than just taxing everyone who is forced to pay high premiums regardless of whether they get a cadillac or escort for those premiums.

There are all sorts of tax disadvantages imposed on small businesses and their employees - this bill should not compound the problem by imposing a tax that will hit small employers/employees disproportionately harder merely because they do not have access to the kind of buying power larger companies have.

[laughingliberal]

31. The House bill does not tax benefits. I prefer we use their model for revenue sources

Remember, taxing benefits was one of the things McCain had in his health care reform proposals.

[Hannah Bell]

32. it would be a bureaucratic & cost nightmare, & it won't be done. better to fight the tax

if your goal is to protect small business.

[laughingliberal]

26. Many people over 50 pay that much for average coverage

It's a middle and working class tax. We need to tax the people who got the big tax breaks under Shrub. That's what the House bill does and I support them in fighting for that in conference.

[harun]

35. Sounds like there is a lot for them to work out in Conference. We hear who is going

to be in that Conference yet?

[Ms. Toad]

7. The biggest problem with defining "cadillac" plan

by premiums is that small businesses are rated based on the health of the individuals employed.

Our office is a case in point - because we collectively have some people with expensive medical conditions, and relatively an older population, our premiums are equivalent to those for high risk plans. Doesn't mean the benefits are Cadillac - it means our employer provides decent coverage - which is "overpriced" because of the population it covers.

[Dinger]

10. Kick & Rec #7 From Me : )

[amborin]

11. many additional problems here, including couning medicare twice:

http://healthcarebeyondpartisanship.blogspot.com/2009/12/liberals-reasons-why-hcr-must-be.html

[amborin]

15. more problems here:

we have ended up with legislation that fails to meet the test of true healthcare reform, guaranteeing high quality, cost effective care for all Americans, and instead are further locking into place a system that entrenches the chokehold of the profit-making insurance giants on our health. If this bill passes, the industry will become more powerful and could be beyond the reach of reform for generations," Higgins said.

NNU cited ten significant problems in the legislation, noting many of the same flaws also exist in the House version and are likely to remain in the bill that emerges from the House-Senate reconciliation process:

1. The individual mandate forcing all those without coverage to buy private insurance, with insufficient cost controls on skyrocketing premiums and other insurance costs.

2. No challenge to insurance company monopolies, especially in the top 94 metropolitan areas where one or two companies dominate, severely limiting choice and competition.

3. An affordability mirage. Congressional Budget Office estimates say a family of four with a household income of $54,000 would be expected to pay 17 percent of their income, $9,000, on healthcare exposing too many families to grave financial risk.

4. The excise tax on comprehensive insurance plans which will encourage employers to reduce benefits, shift more costs to employees, promote proliferation of high-deductible plans, and lead to more self-rationing of care and medical bankruptcies, especially as more plans are subject to the tax every year due to the lack of adequate price controls. A Towers-Perrin survey in September found 30 percent of employers said they would reduce employment if their health costs go up, 86 percent said they'd pass the higher costs to their employees.

5. Major loopholes in the insurance reforms that promise bans on exclusion for pre-existing conditions, and no cancellations for sickness.

The loopholes include:

* Provisions permitting insurers and companies to more than double charges to employees who fail "wellness" programs because they have diabetes, high blood pressure, high cholesterol readings, or other medical conditions.

* Insurers are permitted to sell policies "across state lines", exempting patient protections passed in other states. Insurers will thus set up in the least regulated states in a race to the bottom threatening public protections won by consumers in various states.

* Insurers can charge four times more based on age plus more for certain conditions, and continue to use marketing techniques to cherry-pick healthier, less costly enrollees.

* Insurers may continue to rescind policies for "fraud or intentional misrepresentation" - the main pretext insurance companies now use to cancel coverage.

6. Minimal oversight on insurance denials of care; a report by the California Nurses Association/NNOC in September found that six of California's largest insurers have rejected more than one-fifth of all claims since 2002.

7. Inadequate limits on drug prices, especially after Senate rejection of an amendment, to protect a White House deal with pharmaceutical giants, allowing pharmacies and wholesalers to import lower-cost drugs.

8. New burdens for our public safety net. With a shortage of primary care physicians and a continuing fiscal crisis at the state and local level, public hospitals and clinics will be a dumping ground for those the private system doesn't cover....

snip

http://www.pnhp.org/news/2009/december/nation%E2%80%99s-largest-rn-organization-says-healthcare-bill-cedes-too-much-to-insurance

[Hannah Bell]

24. good summary.

[leftstreet]

25. K&R

[Vidar]

34. K&R.