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Details Emerge On White House-Labor Health Care Agreement
President Barack Obama
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The Obama administration and organized labor have reached a tentative agreement on the so-called Cadillac tax on high end health insurance plans, signaling that Democrats may soon be able to resolve their differences over how to finance health care reform.
Unions had opposed the measure, which, as originally designed, would have imposed a 40 percent excise tax on insurance policies that cost more than $23,000 for families, and $8,500 for individuals, indexed just above inflation.
Under the terms of the proposed deal, the threshold for families would be raised to $24,000, and would exempt certain benefits like vision and dental, according to a Democratic source.
Collectively bargained plans would be exempted until 2017, to provide workers with a real opportunity to renegotiate their benefits packages, which were designed under current law and excluded from taxation.
The White House appears to have stood its ground, though, on the question of how to index the tax. By indexing it just above the consumer price index, the provision generates a great deal of cost-savings, which are crucial to getting a passing score from CBO.
Labor officials and progressives had suggested the index would have to be raised to keep pace with medical inflation--a tweak that would prevent the tax from ensnaring middle class people over time, but that would also eliminate the measure's savings potential. But they seem to have lost that fight.
Now the question is, will House Democrats--particularly progressives, and those close to unions--close ranks around a bill with a financing measure they still don't like? They will be briefed in detail later this afternoon. The tax remains deeply unpopular in the caucus, but a direct appeal from President Obama carries a lot of weight.
We'll get you more details as they emerge.
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mcc
January 14, 2010 3:51 PM
This seems fair enough to me. Unions don't get any special rights under this plan, but nor do they get screwed over by tax law changes in the middle of long-term contracts they're locked into.
I'm glad to see the dental exemption. Up until now I've been confused how the excise tax is supposed to interact with supplemental plans overall...
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JorgeOrwell
January 15, 2010 3:59 AM in reply to mcc
Almost there! Just the small matter of including that pesky public option.
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Moose49
January 14, 2010 4:09 PM
If labor can live with it, they'll vote for it.
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JorgeOrwell
January 15, 2010 12:27 PM in reply to Moose49
Yeah, "F" the rest of us who put in countless hours and money we don't have campaigning for Dems in "07!
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mans_best_friend
January 14, 2010 4:10 PM
$23,000/year is a pretty pricey plan. The health plan that congressmen have (the one everyone thinks is so great) costs much, much less than that.
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admiralmpj
January 14, 2010 4:14 PM in reply to mans_best_friend
Isn't the average plan like $12,000 for a family of four?
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JC Aevaliotis
January 14, 2010 4:24 PM in reply to admiralmpj
$23,000 is pretty pricey right now, but at current rates of medical inflation, it won't be pricey for very long (premiums more than doubled from 2000 to now).
Obama and some experts on the economics of health-care seem to believe in this excise tax, presumably because it helps "bend the cost curve." I don't entirely understand this, though, because it seems to dis-incentivize spending rather address spiraling costs (which is the root problem, right?). I know there are some attempts to address costs in the bill, but does anyone have info on why Obama and others are so sold on the excise tax as part of cost-curve bending?
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The Commenter Formerly Known as NCSteve
January 14, 2010 4:39 PM in reply to JC Aevaliotis
http://voices.washingtonpost.com/ezra-klein/2009/12/attacking_the_excise_tax_--_an.html
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lousgirl84
January 14, 2010 4:55 PM in reply to The Commenter Formerly Known as NCSteve
Thanks for that link. Klein makes a good argument.
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mans_best_friend
January 14, 2010 4:45 PM in reply to JC Aevaliotis
The reason these plans are so expensive is that they're first-dollar coverages. A modest deductible or copay isn't a horrible burden and isn't going to stop people from getting care when they're sick, but will provide a disincentive for using resources unnecessarily. That's where bending the cost curve comes from.
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bluebell
January 14, 2010 7:01 PM in reply to mans_best_friend
As an aging boomer I can tell you exactly how such disincentives work and let's use teeth as an exampe given that they're even going after our dental plans.
You have a toothache. The cost of seeing a dentist is a disincentive. You take OTC pain relievers instead. To make a long story short, youh wind up needing a crown and a root canal and after both fail you lose the tooth anyway. That's what happens when they design healthcare plans to discourage you from getting healthcare.
When they discourage you from getting that skin lesion checked out or the lump looked at the results are more dramatic.
Bending the cost curve is just incomprehensible b.s. for screw the middle class.
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condew
January 14, 2010 9:06 PM in reply to bluebell
I wish they had put limits on how much discount providers can give insurance companies. It's very American to say the price is the same no matter who you are. If providers charged a fair price I would not be nearly so afraid to become uninsured.
For example, I just received my statement of benefits for routine blood tests associated with a checkup. The lab billed insurance $644; the insurance company price is $29.64, a 95.4% off the $644 the lab would bill be for if I didn't have insurance or if my insurance had refused to pay. There is something very corrupt about a 95.4% discount.
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Tanjaoui
January 15, 2010 12:28 PM in reply to condew
It's part of risk pooling, which is the only way to make what's unaffordable affordable. The bigger the risk pool, the larger the discount. Which is why a national risk pool would make sense. A negotiator can then leverage their market share more effectively. At least that's how I understand it. Providers do the same thing: an aspirin in a hospital costs $2 so the surplus can go to buying the latest scanner or to help treat uninsured people who show up in the emergency room.
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JorgeOrwell
January 15, 2010 12:42 PM in reply to bluebell
Word
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fsudirectory
January 14, 2010 5:49 PM in reply to JC Aevaliotis
It will decentivize insurance companies from offering more expensive plans (aka not charging bullshit rates because people will pay it (or die)) and actually make them mark rates to a reasonable standard, so if they want to go above it, they need to pay a penalty for doing so (less of a return when charging more, so then they will need to charge crazy amounts to get the same return and be a useless product because no one will buy it, so they will need to find a way to lower the price so people will buy the product)
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MyMy
January 14, 2010 6:22 PM in reply to JC Aevaliotis
I know single adults now paying $1700 / month for health insurance. Totally unsustainable.
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dtOZONE
January 14, 2010 6:24 PM in reply to MyMy
I'm paying a lot more already.
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JorgeOrwell
January 15, 2010 12:32 PM in reply to admiralmpj
$12,000? That is pretty wishful thinking. That's if you have NO preexisting condition. And are you are JUST talking about premiums or are you adding in deductibles and co-pays? Don't even geyt me started on that!
Here are some more accurate numbers...
1. $16,771 for a family of four in 2009
2. $15,609 for a family of four in 2008
3. $14,500 for a family of four in 2007
4. $13,382 for a family of four in 2006
5. $12,214 for a family of four in 2005
http://www.usnews.com/articles/opinion/2009/05/26/healthcare-costs-rising-for-average-family-of-four.html
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JorgeOrwell
January 15, 2010 12:41 PM in reply to JorgeOrwell
And I might add the cheapest plan I could find for a single guy was around $9000 a year. AND, I have no preexisting!
That was a pretty high deductible plan only suitable for catastrophic illness.
Then you gotta wonder...they gonna pay???
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barbara63
January 14, 2010 5:11 PM in reply to mans_best_friend
Great point! Furthermore, the tax, as I understand it, applies only to the amount of the benefit above the 23,000. So if a plan is worth 25,000, only 2,000 of it would be taxed.
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Miles
January 14, 2010 7:00 PM in reply to mans_best_friend
CBO says that the tax will hit 25% of plans in 2019. I'm guessing it'll hit 50% by 2024 and 75% by 2029.
So it's either a flat tax to pay for the subsidies, or it won't generate the necessary revenue. Granted, incomes may climb because of it, but that income tax revenue won't be earmarked for the subsidies.
I think it's a terrible idea.
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condew
January 14, 2010 9:16 PM in reply to Miles
Either that, or insurance premiums will change to be less than the tax threshold. So your plan pays 80% of major medical now, 50% in 2024, and 30% in 2029. In other words, more and more of the risk you insure against will be dumped on the individual.
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George
January 14, 2010 9:01 PM in reply to mans_best_friend
The Congresspersons buy through a market place. That, a market place, may or may not be available in this bill.
Personally, I think it is a mistakes to keep the employer insurance process because U.S. businesses are at a disadvantage with all of the other developed countries. The companies there don't have to provide health care benefits to their employees.
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Bloggin
January 14, 2010 9:16 PM in reply to mans_best_friend
After healthcare reform kicks in, there won't be a need for $24,000 healthcare plans for a family of 4, or $8,500 plans for a single person. And that's not even talking about the deductible that has to be met 'before' anything is paid by the insurance company.
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libdevil
January 14, 2010 4:33 PM
Whether it's pricey or not is irrelevant to the basic unfairness of this tax. It's a tax on the price of the plan, not the actual benefits, which means it's going to hit people who work for small businesses (which pay more for insurance than big corporations). It's going to hit businesses with older work forces harder than those with younger workers (as if they needed yet another excuse to engage in age discrimination). It's going to absolutely hammer small businesses who don't give into insurance company arm-twisting to fire (and drop coverage on) employees who have expensive illnesses. It's going to crush workers in high-risk industries.
And worst of all, it's going to lower compensation to workers. Businesses will drop their high cost insurance plans, but there is no way, absolutely none, that the compensation that was formerly paid in health insurance will all go to the workers. It just won't happen. And even if it did, it's now subject to income taxes, so overall net compensation would still go down. This tax is a bad deal for workers, a great deal for employers who now have yet another excuse to wring their hands and play 'pity me' while wringing more concessions from their workers.
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dtOZONE
January 14, 2010 4:53 PM in reply to libdevil
There are small business with healthcare plans THAT expensive?!?!
Then why are we bothering with this bill?
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barbara63
January 14, 2010 5:18 PM in reply to dtOZONE
No kidding. I've worked at a several small businesses and one large public entity, and my benefits never came anywhere close to reaching the 8,000 level for individuals or the 23,000 for famlies. Shoot, I didn't even make 23,000 a year at one of the jobs!
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dtOZONE
January 14, 2010 6:16 PM in reply to barbara63
My healthcare is the most expensive anyone has seen and it costs me about $2800 a year. $8,000 a year? That's Wall Street healthcare1
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cwnidog
January 14, 2010 6:35 PM in reply to dtOZONE
Hardly. My individual Blue Cross plan (I'm self-employed) which includes a deductible and a co-pay is more than $7200/year and I know plenty of people who pay more.
This really is "individual" it covers one person only, no wife, kids, pets, etc.
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barbara63
January 14, 2010 7:44 PM in reply to cwnidog
You need to shop around for better rates! We have a family plan with a high deductible and we pay about 4800 a year, and my husband and I are both over 45.
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AnonymousCoward
January 15, 2010 9:43 AM in reply to barbara63
The tax includes the employer-paid portion of the insurance premiums, so what you are paying out of pocket isn't really relevant to determining how expensive your plan is.
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JorgeOrwell
January 15, 2010 12:38 PM in reply to barbara63
Why don't you share the provider with us? that number is like 4500 lower than what I could find for single coverage.
And what's the point of having insurance if your deductible is so high you can't afford it anyway? Not to mention these companies will do everything they can to deny your claims once you make them.
They ain't in the insurance racket to pay out guys. Wake up.
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Forrest
January 14, 2010 5:16 PM in reply to libdevil
The average price of a family health insurance policy in 2009 was $13,375.
In 2006, when the average cost per month for a small-group family policy (which many small businesses would be force to take) was $814 per month, the national average was $956 per month. Based on those numbers, you could say that for many small businesses, their health care costs are roughly average.
You're also forgetting some other parts of the HIR bill, though. The other problems you mention, like increased costs due to age and health of employees are to some extent being addressed by it.
It'll be up to unions to negotiate acceptable compensation for the loss in benefits that workers will certainly see. That's what dues are for, right? Union workers are really the ones that could get screwed by this, and they have 7 years to renegotiate contracts.
I think you're grossly over-representing the impact this excise tax would have on small businesses. I've worked for small businesses all my life, and never has one even offered such an expensive plan.
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admiralmpj
January 14, 2010 6:01 PM in reply to Forrest
Thank you. I thought I was in the neighborhood.
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JorgeOrwell
January 15, 2010 12:45 PM in reply to Forrest
You guys are dreaming. Why don't you share the name of that insurance outfit? I'd like to have a look at what they offer.
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Theda Skocpol
January 14, 2010 5:47 PM
This is a very good agreement, particularly the exclusion of dental and vision care. Progressives and the unions must sign on, or else health care reform will not survive. They must have the CBO projection of long-term savings.
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condew
January 14, 2010 6:04 PM
I can continue my one-person medical plan that costs $4K/year now at $11K/year if I retire; and it is the primary reason I can't retire early. Obama's deal just made it worse; not only will my health insurance cost $11K, I'll have to pay a "Cadillac" tax on it.
And just a month ago we were talking about an over-55 buy-in to Medicare. I thought that indicated that my government recognised that health insurance for those over 50 is prohibitively expensive.
I'm middle class and I've been screwed. Thanks, Obama, when I supported you and voted for you I thought you were progressive.
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dtOZONE
January 14, 2010 6:14 PM in reply to condew
What kind of moron would retire early if their healthcare costs would nearly triple if they did? That doesn't make any sense.
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mcc
January 14, 2010 6:17 PM in reply to dtOZONE
I think that's exactly what he meant. I.E., if he retires early his health care costs will go up by 3x, therefore he is not retiring early even though he would otherwise want to.
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dtOZONE
January 14, 2010 6:24 PM in reply to mcc
Then what difference does the tax make if you're not going to retire anyway?
If you're going to retire early and accept a 3x increase in your healthcare, I almost feel like you should be taxed for being so fucking stupid. Why would anyone do that unless they have some physical issue to do so, which would make this whole debate moot.
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condew
January 14, 2010 6:28 PM in reply to dtOZONE
My point for the discussion is that as you get older, insurance gets a lot more expensive, to the point that you don't retire before 65 voluntarily.
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Tanjaoui
January 15, 2010 12:36 PM in reply to condew
A lot of people stay at their current jobs which they hate or aren't good at or are just tired of only for the insurance. That's a good argument for single or all-payer. Medicare for All would make for a more efficient economy and a healthier populace.
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rbe1
January 15, 2010 2:36 PM in reply to dtOZONE
You really need to work on your personality. I doubt You know the person you're calling stupid, but maybe you should look in the mirror, because what this other person was saying didn't sound all that stupid or unreasonable.
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mcc
January 14, 2010 6:15 PM in reply to condew
I'm confused. "One-person medical plan"? Do you mean you are buying insurance as an individual, and/or self employed?
The excise tax does not apply to individuals, only to employer-purchased plans. Also the tax itself is paid by the insurance company, not the insurance purchaser.
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condew
January 14, 2010 6:25 PM in reply to mcc
I mean I am talking about covering one person; no spouse, no children, This is a corporate plan where company rules say you can continue it into retirement after 10 years with the company and age 55. The costs come from the company's retirement estimator; $11K at age 55, increasing to $19K at age 64. At these prices, I think all I've "earned" is the ability to buy insurance without concern for pre-existing conditions.
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Nutter
January 14, 2010 6:31 PM in reply to condew
I see....I should tea bag him because....you now have to retire on time just like the rest of us? And now you are angry because...of something the bill would get rid of....
If a Republican calls you a welfare queen, I won't disagree.
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bluebell
January 14, 2010 7:09 PM in reply to Nutter
I believe a Republican might recognize that a tax is the opposite of welfare. I expect they will be pointing that out in the next election.
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libdevil
January 15, 2010 12:10 PM in reply to Nutter
Come on, this is ridiculous. This guy wants to and could retire, except for one specific expense. Do you think his heating bills, or car payment, or homeowner's insurance are suddenly going to triple in cost if he retires? Of course not. Just health insurance. Which means, like millions of others, he's getting screwed by our horrible system of paying for health care. We need to fix it, and even the 'good' version of the bill that the House passed doesn't come close to doing that, let alone the Senate abomination. Time to join the rest of the industrialized world and improve care while lowering costs by implementing true universal coverage.
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Tom Hilton
January 14, 2010 6:39 PM in reply to condew
The excise tax would have a higher threshhold for people over 55 (because insurance costs more for older people).
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barbara63
January 14, 2010 7:51 PM in reply to condew
You know, you could still probably retire early -- just dump your employer's plan and shop around for an individual one. I think you can probably find an individual plan in your area that costs less than 8000 a year.
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nygal
January 15, 2010 3:09 PM
In NYC individual health insurance runs 750-1000 month and that's for non-cadillac coverage. The problem is the differential in rates state to state. in Michigan I could get an indivdual plan for 100/month and it was pretty decent coverage - but requires women of childbearing age who may become pregnant to pay a maternity rider. so they'll cover you if you get pregnant. This is alsoa common practice. The limit should be the highest cost plan on a yearly basis offering standard coverage. In NYC the minimum would have to be at least $10k for individual plans - because the tax alone 40% could purchase a cadillac plan in another state.
it would be great if rates/availability were the same no matter where you lived. sigh
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