Free Markets, Free People

Massachusetts may preview the “Cadillac” tax fight to come

Massachusetts is discovering that while you may like your doctor and your insurance plan, you may be paying a heck of a lot more for them in the future, if you get to keep them at all. Guess who are the recipients of “Cadillac” plans in the Bay State? If you said “municipal workers” you’d be right. And an assessment of the various plans doesn’t bode well for them if the “Cadillac” tax kicks in:

A family health plan that costs more than $27,500 would be subject to a 40 percent tax on every dollar spent above that threshold. The tax, set to take effect in 2018, would be levied on insurers, who would probably pass it on to municipalities and other employers. A few cities and towns already have family plans that exceed $27,500, and many others are on track to surpass that level before the tax kicks in.

That means taxpayers in many communities could be facing thousands of dollars in additional costs for every employee, retired worker, and elected leader they cover, unless those communities move soon to scale back coverage, a change the law is designed to encourage.

You caught that last line, didn’t you? “A change the law is designed to encourage”. What about “if you like your doctor and you like your insurance plan …”? The answer, of course, is “too bad”. Taxpayers will be on the hook to pay the tax or workers will have to take fewer benefits. Check these costs out:

Framingham has dozens of employees enrolled in two of its family plans at annual premiums of $40,475 or $39,150, far in excess of the threshold. For individual plans, the excise tax threshold is $10,200, and Framingham has scores of employees enrolled in plans with annual premiums of $16,275 or $14,500.

Many other cities are already close to the family plan threshold and on pace to exceed it by 2018 because of increases in health care costs, including Everett ($27,048 in annual premiums), Brockton ($25,776), Malden ($24,360), Newton ($23,844), Revere ($23,604), and Peabody ($23,466).

If the new tax were in effect today, Framingham would probably face an additional expense of $4,660 to $5,190 for every employee in the family plans, and $1,720 to $2,430 for each employee on an individual plan.

Waltham would also be liable for the excise tax because it offers a family plan with an annual premium of $30,415, almost $3,000 over the threshold.

And Lawrence, one of the poorest cities in the state, also exceeds the tax threshold by providing a family plan that costs $30,180, though the city may join the state’s Group Insurance Commission as part of its financial restructuring.

Here’s the obvious attempt to fool the public into believing someone else (or something else) will be paying the tax:

The tax would apply to health insurers, such as Blue Cross and Blue Shield of Massachusetts and Harvard Pilgrim Health Care. But the insurers would probably pass the additional cost to employers, including municipalities, Seifert said.

On average these municipalities pay 85% of the premium costs. And many of the health care benefits were the result of union negotiations.

So municipalities would have to do what? They have two choices – pass the cost along in a tax increase or cut the cost and benefits to municipal workers. But doing the latter wouldn’t be as easy as you might think.

The country’s major unions, including those representing public employees, fought hard to block or weaken the so-called Cadillac tax, saying it would penalize workers who gave up higher wages for richer benefits.

“It was the main issue our national union was concerned about,” said Brad Tenney, secretary treasurer of the Professional Fire Fighters of Massachusetts. “The concern was that some of our plans that are high value would be hit by this.”

Tenney said union pressure on Congress produced an exception for law enforcement personnel, including firefighters, because of their dangerous duties. For them, the threshold for family plans to trigger the tax would be $30,950, and the individual threshold $11,850.

Ginger Esty, chairwoman of the Framingham Board of Selectmen, said firefighters and others must be willing to accept less generous health coverage for the town to avoid significant layoffs.

“The cost of health care already is extremely expensive,” she said. “And if we don’t get any relief from the unions, there’s only one thing we can do, and that is lay off workers.”

But Pete DeVito, president of the 140-member Framingham Firefighters union, said although he is open to talking with town officials, he would continue to be protective of benefits.

“Everything we got, we got at the bargaining table,” DeVito said. “We don’t like this Cadillac tax because it would hit us. But we have confidence our national representatives will fight it off” by 2018.

On the local level, firefighters and other unionized workers in Framingham have already increased the share of the premium they pay from 10 percent to 13 percent, DeVito said.

Under state law, cities and towns cannot change the mechanics of the health care plans they offer — the amount employees pay in premiums and in copayments, for example — without union approval.

So there you have a preview of the upcoming fight – certainly 8 years away, but none-the-less one that will simmer the entire time – and the probable results. Tell me how, even with 8 years yet to pass, this redounds well on Democrats.

Many say this particular tax will never be enforced. Possibly not – I mean, can you see Democrats pushing to have this finally enacted given those affected by it? But if that’s the case, then another major revenue stream disappears that was destined to help pay for HCR. Another in a long line of lies, half-truths and nonsense sold to get the bill through Congress with at least the veneer of justification. It makes the CBO numbers even more nonsense than they already are.

It’s also an issue which should be brought to the forefront of every single discussion about the impact of this bill and waved in the face of those who fight repeal. It is now nor has it ever been the business of the government as to what benefits I have negotiated (or have negotiated on my behalf) when it comes to health care insurance. And I think those that remind the people of that premise will find a willingly receptive audience.

~McQ

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15 Responses to Massachusetts may preview the “Cadillac” tax fight to come

  • I can’t for the life of me understand why these plans cost so much.  Do you get new bionic limbs each year?   That’s a staggering amount of  money.

    • Nothing but the best for our public servants. But in all seriousness, one word: Unions.

      • But what is it buying?  Back when I worked for some large companies it was about $400-$500 per person per month for extravagant coverage (read: the doctor would wipe your *ss after each visit to the loo) but I’m pretty sure a family of 4 was less than that rate per person (more like $1500 a month) so that’s about 18k a year.  I can’t figure out how it could be double (or more) that.  Have premiums really more than doubled in the last decade?  My daughter and I enjoy monthly premiums of $190 for a 5k deductible.  It’s not even close enough to call it night and day.
        And why wouldn’t the unions prefer to have most of that in cash instead of health insurance?

        • Have premiums really more than doubled in the last decade?
           
          I can’t speak for what it is like in other states of course, but here in Texas, my wife and I have insurance that has seen premiums triple in the last five years alone.  Of course, we have a top notch plan that we choose to pay for.
           
          read: the doctor would wipe your *ss after each visit to the loo
          That’s weird … cuz… I had to change doctors recently because he enjoyed wiping my ass way too much.
          I’m all like … “Dude!! If you’re looking for your co-pay, you’re looking in the wrong place!!”
           
          Cheers.

        • “My daughter and I enjoy monthly premiums of $190 for a 5k deductible”

          There is part of your answer, “…5k deductible”.  If everyone had that large a deductible their premiums would be lower. Then there is the coverage, which increases as each victim group claims their particular need should be part of standard coverage; pregnancy, mental health care(for the balooning number of mental illnesses), cosmetic surgery, sex reassignment surgery, etc. Doctors who prescribe $1,000 MRIs for sinus problems,  shoulder or back pain,etc.

          • People are (mostly) insane or ignorant.  I can’t fathom spending 20-40k on PREMIUMS a year unless I had a medical problem that cost at least that much.  Most of the people spending that kind of dough (indirectly, I realize) would end up as multi-millionaires if they invested the difference.  Why don’t people raise a  stink with their employers and state legislatures?  Are they clueless? Do they really think ultra expensive insurance is a productive use of money?

          • 793 per month with 3,000 deductible for 4 people (2 adults, 2 kids) in California through Kaiser.
            It was lower (549) but we went up an age bracket.
            I would gladly go up to 5,000k deductible if it were offered and cheaper – its hard to get over 3,000 anyways, even with minor procedures.
             

          • Group policies cover the young and the old for the same cost.  Heart surgery may cost $200K in hospital costs alone.  Grimshaw talked about expected medical expenses, but the real purpose of insurance is for the unexpected.  One serious illness can cost substantially more than 10 years worth of premiums and that does not count continuing care or doctor’s fees.

          • “Are they clueless? ”

            Yep.

      • Nothing but the best for our public servants. But in all seriousness, one word: Unions.
         
        Well that’s a double wammie, but I’d say the public servant part has more to do with it than the union part.  But I guess the majority of union workers are now government union workers so its hard to separate the issue I guess.

  • I know what side I should be on here about this article…..but just for this moment, I couldn’t care less about the unions.

    Go screw, all of you.

  • Glenn Reynolds had a column on the” knowledge problem”.  It was directed at Waxman and the inability to comprehend all the federal statutes when creating new legislation.  This is the problem Hayek identified as to why central control of complex systems can never work even close to efficiently.  No person or group of persons could ever comprehend or anticipate all of the factors necessary to come to a correct judgment.   It is the price system that provides that knowledge in the economy.  Prices are not controlled centrally.  Everyone contributes his little piece.
    Couple that with the restrictions on the CBO to do static analysis and assume everyone will blissfully continue doing whatever they were doing regardless of increased taxes and we get less revenue and more expense than projected.  Every government program will cost more and deliver less than initially projected.    You would think legislators would eventually figure this out and take it into account.  You would think wrong.

  • How can a family plan cost $40k/year? Over here in CA, my company pays $20k/yr to insure two families, with a total of eight adults and children. That comes to about $200/mth/person.