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I have been reading posts that talk about the Cadillac tax in abstract terms, as a tax that would impact only wealthy people with wonderful benefits or professional athletes, or some class of "other people."
I don't know about other people, so I'm going to talk about me. I am not a professional athlete. I am not a union member. I have the great fortune to enjoy good health and to have a healthy family, but we are not wealthy and we do not have wonderful benefits.
Our health insurance benefits are, at best, adequate. And yet, within two years, at the current rate of premium increase, our plan will fall under the Cadillac Tax.
Our plan is not a Cadillac of plans, by any stretch of the imagination. We have co-payments, we have limits on covered expenses, we must use in-network providers or face additional deductibles and cost-sharing. We have no dental or vision coverage at all -- if we did, we'd probably fall under the Cadillac Tax now.
My coverage is not great, it's not even good. It's just expensive.
That's an important point. The cost of coverage is not always or only related to the quality of the coverage. The cost is largely based number of people in the risk pool and the relative health of the people in the risk pool. Additionally, a large number of subscribers helps an employer negotiate a better deal with the insurance company. (Now think about that. When the insurance company gives one employer a great deal on their policy, isn't it likely that they make up the profit by giving someone else a not-so-good deal?)
My coverage is expensive because I have it through a small company. My coverage is probably even more expensive than the average small company because this small "risk pool" of employees includes a number of people who insurers charge more for coverage -- women of child-bearing age, people over 50, but not yet 65, as well as several cancer survivors.
Looking into the future, I can predict the probable impact of the Cadillac Tax on my coverage.
First, I'm not going to pay the Cadillac Tax. Through my plan, not one cent will be collected to offset the cost of covering the uninsured. Instead, the employer will change the plan to one that no longer falls under the tax.
Of course, a less-expensive plan will provide less coverage than the plan I have now. To charge lower premiums, my plan will have higher deductibles, higher co-payments, additional restrictions on covered expenses, and increased cost-sharing. They call it "sharing" but, of course, what it really means is that I will pay more and they will pay less (insurance companies' idea of sharing is a lot like the Republican idea of bipartisanship).
So one likely consequence of the Cadillac Tax on my life is that within two years I will have worse coverage than I have today.
Of course, that's only one possible future. The employer might also sit down with the accountants, calculate the fees and fines, and ultimately decide to simply end coverage through an employer-sponsored plan. Which, as I understand it, means I would join the small percentage of people eligible to participate in the Exchange.
In the Exchange, which at this point is largely mysterious, I would have more choices. But more, is not necessarily better. The invisible hand of the market, through the magic of competition is supposed to lower the prices of plans on the Exchange.
But then, since my existing coverage is so expensive because of the small size of the subscriber pool, I'm skeptical that having a choice of many small plans would be in any way less expensive than what I have now. There is also no guarantee that the plans offered on the exchange would include coverage as good as what I have now, though it's hardly luxurious. There will, however, be low-cost plans, offering high deductibles and low reimbursement rates, that though they may cost less in premiums, will not keep my family out of bankruptcy if one of us is sick or injured.
But, all in all, as a healthy person, with a healthy family, unless something changes, I think we'll do ok, though we will almost certainly be worse off than we are today.
I'm less certain that the other people in the company will be ok. The employees who are over 50 but not yet 65, can be charged more for coverage on the Exchange, and may only be able to afford coverage that doesn't adequately cover their needs.
The women of child-bearing age, might be charged more for their coverage (though the amount will be limited) and depending on the state, those choices might or might not include full reproductive care. If they choose a plan that does cover full reproductive care, there will be two separate deductions on their pay-stub ... which tells anyone who has access to their paychecks that they have chosen a plan that includes that coverage. So much for privacy in health care decisions.
The cancer survivors ... well, the ban on pre-existing conditions doesn't kick in for them right away. And I'm unclear on how much more they might be required to pay for their coverage. If someone is familiar with that part of the bill, I would like to know.
As I see it, under the exchange, I might do fine, after-all, I'm one of the people who brings the overall cost down for the small risk pool at this company. As I understand it, however, the other people in the risk pool might very well be worse off under the Exchange.
But then, this assumes that everyone in the company will continue to work for the company, that the company will continue to function as it does today. That is an assumption without basis, however. The company might go under, putting all of us into the growing ranks of "the uninsured."
Or, faced with increasing health care costs and shrinking profit margins, the company may decide it needs to selectively reduce its workforce.
Just for a minute, pretend you are the head of the company. You need to fire some of your employees, you may not want to, but if you don't the whole company will fold. Who do you let go?
The over 50, but not yet 65? They have good salaries, though everyone a the company has had a fairly flat salary for the past several years due to the ever-increasing health-insurance costs. Additionally, removing these people from your risk pool will lower the overall cost of your insurance.
How about the women of child-bearing age? Sure, you might pay them less than you would a man, but there's a chance they might get pregnant. And then there's maternity leave, staying home with sick kids, and the simple fact that the insurance company charges more for their coverage. Removing them from your risk pool, may lower the overall cost of your insurance.
How about the cancer survivors? Recently, their work has suffered because they were somewhat preoccupied with fighting cancer. But even if you want to keep them on, you know that removing them from your risk pool will dramatically lower the cost of your insurance.
Faced with these decisions, what would you do? If by selectively reducing your workforce to eliminate the people who raise the cost of covering everyone in the company you could avoid the Cadillac Tax, what would you do? Never mind that those are the people who can least afford to lose their coverage, or their jobs, what would you do to save your company?
In the end, I don't know what is going to happen.
But I do know that the Cadillac Tax is not something that only affects "other people." It will impact people I know. It will impact me. And I take that personally.
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