CBPP: "Excise Tax on Very High-Cost Health Plans Is A Sound Element of Health Reform"

[berni_mccoy]

Who is the CBPP?

The Center on Budget and Policy Priorities is a progressive think-tank organization that focuses on how policy affects the poor and middle class. They are considered one of the best research firms by Congress and have been cited by many liberal blogs including Daily Kos, DU, Common Dreams and their research results regarding policy impact are accepted by all, including the CBO and the GAO. They are funded primarily by progressive organizations.

Their purpose (as stated): "The Center on Budget and Policy Priorities is one of the nation’s premier policy organizations working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals"

Perhaps this is why every single progressive in the Senate voted for the bill? The article goes into why the tax plan is misunderstood by many (i.e. misinformation spread about the plan), and that this plan to finance HCR is actually better than the plan from the House.

From the CBPP:

http://www.cbpp.org/cms/index.cfm?fa=view&id=2957

Excise Tax on Very High-Cost Health Plans Is a Sound Element of Health Reform

An excise tax on very high-cost health plans, which the Senate Finance Committee included in its health reform bill, represents a sound way to help pay for health reform. The excise tax finances nearly a quarter of the costs of the Finance Committee bill over the first ten years ($201 billion out of $829 billion) and makes a major contribution to the deficit reduction that the bill would achieve in later decades. It would help to slow the rate of health care cost growth, without which health care reform is not likely to be sustainable over time.

Of particular note, the excise tax produces savings that rise over time at least as fast as the costs of providing health insurance to those now uninsured. Without such a tax, Congress will be hard-pressed to comply with the President's pledge — and Senate rules — that the bill not increase the deficit in future decades.
The proposed tax has attracted a spate of criticism. Many of the charges and the numbers cited in these criticisms are based on an earlier version of the tax, rather than on what the Finance Committee adopted. The committee’s changes to the tax addressed various shortcomings with the earlier version; as a result, many fewer health plans would be affected.
... snip ...

The Joint Tax Committee’s Analysis of the Excise Tax
The Joint Committee on Taxation (JCT) analysis of the Senate Finance Committee excise tax provision is causing some confusion. That analysis forms the basis for much of this paper. But an October 20 press release presents the analysis in a very different light, describing the JCT as finding that “the total number of individual and family plans impacted by the excise tax grows from 19% to 34% and 14% to 31% respectively between 2013 and 2019.” a These numbers overstate the tax’s impact. They also should be understood in the context of JCT’s overall analysis and findings.

The figures do not account for the higher tax thresholds for health plans that cover retirees, workers in high-risk occupations, or (on a transitional basis) workers in high-cost states. These JCT figures reflect only the base threshold amounts of $8,000 for coverage of single individuals and $21,000 for family coverage in 2013.

These figures count health insurance plans, rather than beneficiaries. The difference is significant because many of the plans that would be affected apparently are smaller plans with a below-average number of enrollees. JCT estimates that only 7.7 percent of tax filing units would be affected by the excise tax in 2013 and 17.6 percent in 2019. (A tax filing unit consists of an individual or married couple that would, if their income were above the filing thresholds, file an individual income tax return, along with their dependents.)

Furthermore, JCT reports that most of the affected health insurance plans would not actually pay the excise tax. Employers would modify their health plans to stay within the thresholds for the excise tax, and they would convert the resulting savings into higher wages or other fringe benefits for their employees. JCT estimates that over 80 percent of the revenue raised by the proposal would stem from income and payroll taxes on these higher wages.
... snip ...

The Finance Committee significantly improved the original excise tax proposal during its consideration of the legislation. Its changes substantially reduced the number of plans and enrollees that the excise tax would affect.

Higher thresholds. Under the revised proposal, plans that cover retired people over the age of 55 and people in high-risk professions would have significantly higher thresholds. (High-risk professions include law enforcement, firefighting, rescue/ambulance squads, construction, mining, agriculture, forestry, and fishing.) For each person in one of these categories, the threshold would be increased by $1,850 — to $9,850 — for individual coverage, and by $5,000 — to $26,000 — for family coverage. The threshold for a plan would, in effect, be the average of the thresholds for each of its enrollees.

Increased inflation factor. Under the original proposal, the thresholds would have risen annually after 2013 with the rate of change in the consumer price index (CPI). Under the current proposal, the thresholds would rise with the CPI plus one percentage point. For example, if consumer prices rose 3 percent in a given year, the thresholds would rise by 4 percent. This change in indexing compounds over time and substantially reduces the number of taxpayers and health insurance plans affected by the excise tax in later years.
... snip ...

Bending the Cost Curve
The proposed excise tax would make a major contribution to slowing the growth of health care costs by discouraging insurers from offering, and firms from purchasing, extremely generous health insurance coverage that can encourage excess health care utilization. That, in turn, would reduce incentives for excessive health care spending.
...snip...

An important feature of the excise tax is that, according to CBO, the revenues it raises will more than keep pace with the cost of health coverage expansions in future decades. Pay-as-you-go rules in the House and the Senate require that a bill be fully paid for over the next ten years. In addition, a bill is subject to a 60-vote point of order in the Senate if it adds more than $5 billion to the federal deficit in any of the following four decades.<3> Also, President Obama has pledged that health reform legislation will not increase the deficit at all in future decades. Without the excise tax or a comparable provision, health reform may well fail to meet these budgetary tests.

Most People and Plans Not Affected
The thresholds for the proposed excise tax are sufficiently high that most health insurance plans would not be affected.

In 2009, the average employer-sponsored health insurance plan is valued at $4,824 for a single individual and $13,375 for a family, far below the thresholds for the excise tax.<4>

The health insurance plan most commonly chosen by federal employees — including Members of Congress — costs $5,872 for individual coverage and $13,446 for a family.<5>

Under the Finance Committee’s plan, the threshold for taxation would be at least $21,000 for family coverage in 2013. A plan costing $21,000 in 2013 (the equivalent of about $17,550 in 2009) would be about a third more generous than the plan that most Members of Congress have. It also would be about a third more generous than the typical employer-sponsored health insurance plan.

The Congressional Joint Committee on Taxation (JCT) estimates that only 7.7 percent of tax filing units would be affected by the excise tax in 2013 and 17.6 percent by 2019. For those plans that would actually pay the excise tax, that tax would apply to only a portion of the plan’s value — the amount above the threshold.

Moreover, most of the affected plans and households would not actually pay the excise tax or higher premiums that reflected that tax. The JCT, as well as most economists and health analysts who have examined the proposal, concludes that health insurance plans and employers generally would respond by modifying their health plans to stay within the thresholds and avoid the excise tax; employers would convert the savings produced by modifying the health plans into higher wages or other compensation for employees. (Economic analysis finds that employees ultimately bear the employer share of health care premiums by receiving lower wages than they otherwise would. If an employer with a high-cost insurance plan scales back the plan to avoid the excise tax, the employer generally will move the savings to another form of employee compensation. If employers scaled back health plans to avoid the excise tax without passing the savings through in this manner, they would put themselves at a disadvantage with other employers in competing for workers.)

... snip ...

Wages Will Rise, Not Premiums
Contrary to some reports, the excise tax is unlikely to generate much of an increase in health insurance premiums. Although insurers will try to pass along the cost of the excise tax to consumers by raising the price of health coverage, analysts generally expect that health insurance providers, employers, and consumers will modify their behavior to avoid paying the tax.
... snip ...

JCT projects that only 20 percent of the revenues from the proposal in 2014 will come from the excise tax itself, with the remaining 80 percent coming from additional income and payroll taxes on the increased cash compensation that workers will receive. By 2019, fully 83 percent of the additional revenues will come from taxes on higher wages and salaries, not the excise tax.<11>
Based on the JCT figures, the excise tax will reduce spending on employer-sponsored insurance in 2019 by an estimated nearly $74 billion, or about 6 percent — an impressive amount that indicates the measure would be successful in helping to “bend the curve” — and lead to a commensurate increase of nearly $74 billion in wages and other fringe benefits.<12>

There is much more good information at the link that goes deeper and provides more data and evidence for these points. This post simply aims to show that research from a well establish and trusted progressive research firm does indeed show that the Senate tax plan has been unfairly treated by the media and by reaction from the blogosphere, helping to create a division on the left to make passing the health care reform bill nearly impossible.

[Newsjock]

1. Biggest laugh I've had so far today

If an employer with a high-cost insurance plan scales back the plan to avoid the excise tax, the employer generally will move the savings to another form of employee compensation.

Ha. Ha. Ha.

[Kansas Wyatt]

2. You STAND FOR Busting Unions!

Did you see they are taking OUT the pre-existing condition regulation of the HCR/DLC SHIT Bill?

You have been arguing FOR the Insurance Industry.

Told you so!

[berni_mccoy]

6. I'm arguing for HCR. They did not take out PEC.

And I have two children with type-1 diabetes. This is why I fight for reform.

You are arguing against one of the most progressive organizations in existence if you argue the point above.

[Kansas Wyatt]

7. You FORGET

I have had Type 1 diabetes since I was 13, and for 28 years now.

I know exactly what the hell is going on with backroom deals with the Insurance Industry, and you are going to get NOTHING beneficial out of this disgraceful HCR/DLC (Union Busting) SHIT Bill. They have already whittled it down to NOTHING beneficial for the American People, and have made it a BAILOUT for the Insurance Industry. You will NEVER get what you are fighting for with this SHIT Bill.

Hmm... A progressive organization in favor of TAXING my union insurance over taxing millionaires. Think about that.

[berni_mccoy]

8. Then you forget

That I'm a long time activist here at DU and I have actually met with my Reps and Senators w.r.t. Health Care Reform. The OP is not *my* finding, but the finding of one of the most progressive policy organizations in existence.

You don't read and choose to jump to conclusions about peoples motives instead of looking at what is actually being said.

The Tax is on the Health Insurance company, not on you or your Union.

[Kansas Wyatt]

9. You told me yourself the tax was on ME last week.

Why do you keep changing your story?

If what you are saying is true, then why is the Great Obama meeting with unions this week, because they are livid?

Are you just throwing up shit until it sticks?

As for the Democrats you claiming in your OP, are they DLC?

From what I've seen from the Democrats (Republican Lites) the last year, this country is in desperate need of a Third Party.

28 years... More experience than you have seen, in every aspect of how it relates to real life, including activist claims. 24/7 and I can't just take a badge off when the plan turns to shit and doesn't work out.

[berni_mccoy]

11. I did? Link please.

I've consistently stated that the tax in on the Health Insurance company.

Why do you have to attack me? We are actually on the same side here.

[Kansas Wyatt]

12. You said if a contractor contributed over $8,500 to my union insurance...

Then I would be taxed in your 'Cadillac' plan. It was at the end of last week, and you were trying to say that I wouldn't, until I told you exactly how much was paid to my Health & Welfare Fund, which was $7.40 per hour. Ring a bell?

What's the matter, can't remember how much you've been trying to get to stick?

You are not on my side... You are on the side of the Insurance Industry and sellout Democrats, who are giving Republicans their own version of HCR.

28 years, and I've heard all the bullshit before.

Bottom line:
You favor taxing union insurance over taxing millionaires.

[berni_mccoy]

13. You didn't read what I said then.

If your employer (not contractor) contributes more than 8500 to your plan and your plan is an individual plan, then the INSURANCE COMPANY pays 40% on the difference of the plan premium and 8500.

They cannot pass this onto subscribers because it would violate the MLR of 85%.

If you think I'm on the side of the insurance companies, then you don't know me, plain and simple.

And I'm not in favor of one over the other, I'm just trying to show that most of the hype around here isn't warranted. If you think I'm on the side of the insurance companies, then you must absolutely hate all the Senate progressive Dems who actually voted for this. Feingold, Sanders, Durbin, must all be in the pockets of the insurance industry, is that so? :sarcasm:

[TheKentuckian]

14. Berni, how can you miss that there will be no tax because the plans will be slashed?

Liberals in the Senate voted for because they were FORCED to on pain of political (and I wouldn't completely rule out physical) death.

They can vote for the bill or the President and the party will come after them guns blazing.

Obama plays hardball as long as the target is on his left. He only sates power and money, everyone else he feels is more than capable of fucking themselves.

I don't think you're a friend of big insurance but I do think you are heavily relying on trusting the party to do the right thing and I think any thinking person would have to admit that such a position is at least precarious.

[berni_mccoy]

16. As the CBPP points out, this will reduce the cost of plans, putting more money

in the pockets of the employers and employees. This is not simply relying on trusting the party, but reasoned research done by a progressive policy think tank. If you disagree with their results, that's fine, but I tend to believe what they say is true. Their research coincides with the CBO's estimates that the tax will result in more money in the economy which is where your revenue will come from. They are taking the money from the Insurance companies and dumping it into the economy. I think many miss the point of this approach.

[TheKentuckian]

18. How is supply and demand going to create room for wages when demand is so far

ahead of supply?

You realize this logic can only work in a tight labor market, right? The last 30 years should be more than enough proof that more money in the hands of the top does not result in those resources being filtered down. You can't possibly deny that the trickle never comes down, never.

Last year at my old job we had by far our best month after a series of best months with the exact same labor cost and do you know how the additional resources were distributed? Of course they weren't but to add insult to injury pay was cut 30% for all non-management.

Berni, I ask this honestly, do you really think in this environment with current business practices that we are going to get more wages to offset the loss in effective benefits and if so do you really have faith enough to believe it will more than offset the additional cost sharing that is the natural and roundly expected result?

TRICKLE DOWN HAS NEVER WORKED.

[Kansas Wyatt]

19. This progressive does not agree with you.

'Rep. Raul Grijalva (D-AZ), a leading House progressive says if the White House can throw its weight behind a controversial tax in the Senate health care bill, it can stand up for some of the House's priorities, too....

Noting that the President stands foursquare behind the Senate's proposal to tax so-called "Cadillac" insurance policies to raise money, Grijalva put it to him to weigh in on some of the House's priorities. "How do you weigh in on a national exchange? How do you weigh in on a public option? How do you weigh in on the anti-trust exemption?"...

"Watching the fight is not enough," Grijalva said. "The pressure shifts to the White House now."...

House Progressive Caucus Co-Chair Raul Grijalva (D-AZ) has a number of issues with President Obama. But chief among them seems to be that, though they've stayed silent on a whole host of health care issues, they've thrown their weight behind a controversial tax in the Senate bill--one that Grijalva says violates Obama's solemn campaign pledge not to raise taxes on the middle class.

I asked Grijalva whether the White House's support for the Senate health care bill's excise tax on so-called "Cadillac" insurance policies is compatible with his promise on the campaign.

"No, it's not."

This is very dangerous territory for the White House. When you have a Democratic congressman saying that the President is advocating raising taxes on the middle class, that's fodder for campaign commercials against every member of Congress who votes for the health care bill, and against the President himself.'

You've been in favor of selling out everything and anything to get any HCR passed, regardless how shitty it is and will continue to be. Your Great Obama BLEW Health Care Reform right from the start, when he kicked the Progressive Ideals out of the room and insisted on giving the Insurance Industry a seat (pen to write the bill) at the table. You are still stuck on this notion that you are really going to get what the Great Obama thought he could get in the end, which has been compromised and conceded every step of the way.

[berni_mccoy]

20. Attack me personally all you want

It won't change the facts. And Rep. Grijalva isn't arguing against the tax but saying Obama should be fighting just as hard for a PO. I don't disagree with that and I have criticized Obama for not fighting harder for the PO.

[Kansas Wyatt]

22. Rep. Grijalva says that it is a broken promise by Barack Obama.

Which is a tax increase on the middle class.

[Land Shark]

3. A "POLICY" organization whose opinions are "accepted by all"? NO SUCH THING. Unrec for dishonesty.

[berni_mccoy]

5. Their research is cited by both Democrats and Republicans alike

Do this google search: cbpp site:senate.gov.

[grytpype]

4. This is too complicated for the libs.

They can't think beyond "smash the mean corporations."

[TheKentuckian]

10. Policy has always been well beyond the capabilities of low brow conservative lizard brains

and outside the interests of the low information voter.

You sound more like a lost conservative, only they use the term "lib" as pejorative and typically its the "dittohead" types that are quickest to use it.
Did you need a link to Stormfront, Hannity, or FreeRepublic?
I'm sure someone can lend you a hand, if you don't feel you'll be fouled by a dirty "lib" some of our folks pop in and get the latest examples of the proof that most of the conservative bent wouldn't have the brains to put their own balls out if they were on fire, you might be familiar with both those sensation, I don't know.

Of course the points been made by "smash mean corporation" liberals like myself have been exhaustively explaining to our friends with various comprehension problems (including reading) that you are missing or ignoring some of the very reason that this is piss poor policy and it is clearly presented to you by this organization in their sales pitch and the CBO.

For the hundredth time since this bullshit came out of the Finance committee, the whole purpose of this is to reduce systemic cost by reducing plan benefit levels and it does it by taking advantage of the upward pressure of inflation and the downward pressure of the Max Tax/Squeeze play to justify reductions in earned benefit and over time virtually all available plans will be very basic and consist of heavy cost sharing which also means that while overall coverage is expanded access will be purposefully curtailed as people have to forgo treatment they can't afford.
There is little doubt the cost containment would be rather effective though the revenue stream would be fairly dicey over time as the expectation and purpose of the plan is to create an incentive to moving toward junk insurance status, the problem is that containment comes at the expense of what I would assume are three of the major points most folks wanted from reform-quality of care, access, and affordability to preserve what few support or care about corporate profits, the wealth of the rich, and maintaining the employer based system. It is the dumbass cost containment one gets to when they refuse to embrace actual reform.

So, all the savings and a fair chunk of the revenue are generated off of some of the very people it is supposed to help and offers relief only in the form of dumping comprehensive plans for basic ones that transfer more out of pocket expenses and larger co-pays to already strapped working class people that in the end makes sure they have coverage but could give a squat about care in a hairbrained attempt to create "smarter medical consumers" model. That means as we aren't doctors that what is desired is that people decide on a cost basis their treatments rather than being able to rely on expertise.

The idea that lost benefits will show up as pay increases is idiotic nonsense based on an over reliance on failed and disproven economic principles like trickle down, that no matter how demonstrably false and non-applicable this idea is keep getting peddled by witless and blind conservatives.

I just don't get what there is to miss here, especially when the report/study it's self tells you exactly what is going down. What is so hard to process and project here? It's basic stuff. The questions are simple.
A) Do you want to create a system that mandates a pretty hefty monthly payment for low value insurance that many will not be able to afford to use?
B) Do you really expect an environment that will create a seriously competitive situation for wages that will free the market principle of supply and demand that will position the workforce to start to recover value from a couple of decades worth of lost wages?

I think this is important too, C) Why with all the waste and pocket padding out here is the first and only haircut coming from working people? I assure you that the biggest issue damn well isn't comprehensive coverage or over utilization rather the thing is the craven sell outs only have the courage to eat the people they are supposed to represent.

This whole thing is bullshit trickle down theory and cowardice to power and money not reform no matter who shills it. This is just more poppycock from the same Reagan worshipping MBA's and out of touch wonks that brought us medical savings accounts and 401ks.

This ought to be familiar to one like yourself.

THANKS BUT NO THANKS ON THAT BRIDGE TO NOWHERE.

[highplainsdem]

15. Berni, you snipped out a paragraph showing the CBPP making a huge mistake Bob Herbert and others

have pointed out recently.

They're accepting the fairy tale that employers who switch over to lower-cost health plans will decide to give all those savings to their employees in higher wages.

Following this section of what you quoted

many fewer health plans would be affected.
... snip ...

are these paragraphs, which you snipped out:

To be sure, some legitimate concerns remain. Congress can address them, however, with further refinements in the tax’s design, as outlined below. Congress thus should not jettison the tax, but instead make the remaining needed improvements.

Some important aspects of the tax are widely misunderstood. For one thing, an October 20 press release cites the Congressional Joint Committee on Taxation (JCT) as finding that the total number of individual and family plans impacted by the excise tax grows to 34% and 31% respectively by 2019. These numbers overstate the tax’s impact (see the box on page 2). For another, as the JCT analysis shows, over 80 percent of the revenue generated would come not from the tax on insurance premiums itself, but from income and payroll tax revenue on the tens of billions of dollars of higher wages that workers would receive — as employers modified their health plans to avoid the excise tax and converted what they had been spending for health coverage in excess of the tax thresholds into higher wages and salaries. Indeed, one largely overlooked side benefit of the proposal is that by receiving higher wages and paying somewhat more in payroll taxes, most affected workers would qualify for higher Social Security payments when they retire.

Emphasis added to the section that Herbert and others have pointed out as a gigantic fallacy in this "reasoning." Union leaders are rightly skeptical, and Herbert referred to one study already done that showed only a tiny percentage of employers would pass along those savings to their employees as higher wages and salaries.

So the CBPP's logic here is fundamentally flawed. Just as the HCR bill is fundamentally flawed. It's trickle-down economics applied to health care reform. It's a fantasy.

But if you're still impressed by the CBPP, this MSNBC article refers to a CBPP senior fellow, among others, talking about how the HCR bill will NOT provide enough help for people not quite poor enough to qualify for Medicaid, but too poor to afford all the out of pocket expenses they'll still be stuck with even after having the government subsidize their insurance:

http://www.msnbc.msn.com/id/34771054/ns/health-health_care/

[berni_mccoy]

17. I didn't snip that out. It's covered by the last paragraph I quoted

And the revenue will be generated by WAGE INCREASES. That is employers will make more and therefore pay more taxes as will individuals. It's not INCREASING taxes on people, but putting more money into the economy. This isn't a tax that doesn't already exist on workers and if workers are making more as an end result, then everyone wins.

[highplainsdem]

27. Berni, you did snip that paragraph out, even though a later paragraph touched on it,

without showing how this think tank's analysis of the excise tax bought that flawed reasoning so enthusiastically.

And the revenue that supposedly will be generated is coming from imaginary wage increases. It's based on the assumption that businesses who switch to cheaper health plans will pass along all those savings to their employees.

And that's nonsense. It isn't going to happen. As I said, it's trickle-down economics, and I'm stunned to see Democrats believing it. Go read the Bob Herbert column about this that was posted here by a number of people, including myself.

[berni_mccoy]

29. You implied I tried to hide that information which I didn't. The last paragraph covers it

completely and it does not show a flaw in CBPP's reasoning, but shows full disclosure of what they are talking about.

The fact is, if people's wages go up as a result of this tax, they aren't going to care about the income tax that would come off that wage increase. The middle class will see a pay rise and that is why this is a progressive tax. It's not "trickle-down", wish for that as you might, it's a tax on the richest of the rich: the insurance industry.

[berni_mccoy]

24. hmmm... awfully silent after my response...*crickets*

[TheKentuckian]

25. No, I had already addressed the phony concept of increased wages

Hell, you know in you gut its bull or you probably wouldn't even be a Democrat at all unless you're just running from the batshit theocrats.

[berni_mccoy]

26. No facts or evidence from you, just personal attacks.

[highplainsdem]

28. Oh, I was supposed to respond on your schedule? LOL. Btw, you didn't respond to that MSNBC story

I gave you the link for, the one about how little help the HCR bill will give low-income Americans who won't be able to afford health care even with insurance subsidies.

[freddie mertz]

21. The more furiously they promote this boondoggle...

The more I wish we had elected Candidate Obama to the White House.

[berni_mccoy]

23. Who is "they"?