He who getteth the Cadillac plan should payeth the darned tax
I really like the idea of a tax on “Cadillac health plans,” and have said so before. After all, it is generally the richest folks who wind up getting the best gratis health insurance, so why not tax it to help pay for insuring those who can barely afford a bare bones plan?
But I cannot for the life of me understand why Senator Max Baucus, and many before him, are proposing that insurance companies be taxed on the luxury health plans that they sell, rather than simply treating the Cadillac plans as taxable income to the lucky policy holders.
The insurance companies will simply pass the cost of the tax along, in the form of higher premiums. And what is to prevent them from spreading that cost among all their products, thus raising the premiums for plain vanilla plans along with those for luxury plans? This is a system simply crying out to be gamed by the fat cats, whose secretaries will face higher copayments and/or premium deductions even as the bosses pay a pittance more for their stellar policies.
And please, please, please, Congress, if you pass a version of this, put in variations by state — New Yorkers and Bostonians, I’m sure, pay twice as much for the same coverage as folks in Des Moines.
And please, pretty please, Congress, put in yearly reviews of the dollar level at which Cadillac status kicks in. With premiums constantly rising, more and more merely-adequate plans could find themselves costing what Cadillac plans cost today. We have to avoid a situation like the alternate minimum tax, which was never adjusted for inflation and now ensnares any number of middle class folks.
I hate it when a good idea gets so subverted in the execution!