Union bosses howled about one Obamacare tax hike: the levy on “Cadillac” health plans (expensive plans rich in benefits). The problem with this tax, as they see it, is that it hits the very plans often enjoyed by their rank-and-file.
Ever eager to please the unions, Democratic leaders added a “fix” to the reconciliation bill the president will sign into law today (Tuesday). It delays the unpopular tax to 2018. The pols are touting it as a scaled back version of the tax. But even the “fix” is broken.
While the tax won’t bite until after the president leaves office, “scaled back” it is not. The revised version raises the threshold for plans that would be subject to the tax. But it also indexes the threshold to rise with the general inflation rate.
The original tax was indexed to general inflation plus 1 percent. The “plus 1” was meant to account for the higher rate of inflation in medical costs. Dropping that “plus 1 percent” means that more and more Americans’ health plans will fall under the tax as premium costs continue to outpace inflation.
According to the Joint Economic Committee, “Under the provisions of the proposed “fix”, the high cost plans tax will hit the average family plan five years earlier. The subsidized exchange “silver plan” premium would be subject to the tax eleven years earlier.”
Bottom line: Though the tax may be “scaled back” in the short term, it will hit more Americans’ health plans sooner in the long term.
Rather than simply increase taxes to expand government health programs, Congress should replace the current tax exclusion with a fairer system: universal tax credits. Short of that, there are a number of practical steps Congress can take to expand private health insurance coverage and treat all citizens more equitably. It’s all explained here by Heritage analyst Stuart Butler.
To learn more about sensible tax reform that experts and lawmakers from both sides of the aisle support, click here.