taxes

Cadillac vs Chevy health plans

Tuesday, Sept. 29
Posted: 8 a.m.

Are you driving a Cadillac health care plan at your job?

The luxury auto name conjures up fat cats with health care policies paying a lot for every conceivable medical malady. That's not necessarily true.

Sure, some high-placed and highly-paid executives can afford the most expensive health care option available. But even we regular folks might find that what we thought was the Ford Taurus of workplace plans falls under the Cadillac nameplate.

The distinction is important because under the health care overhaul first proposed by Senate Finance Committee Chairman Max Baucus, D-Mont., a couple of weeks ago, your workplace medical coverage could be taxed.

If your coverage's value exceeds $8,000 for individual coverage or $21,000 for family coverage, the insurer would face a substantial excise tax.

What's your cost? Right now you probably don't have any idea what your overall health care plan costs are, unless you've recently asked your boss for a raise. (Brave aren't you in this economy. But I digress.)

It's usually when compensation comes up that you learn how much you get from your employer via benefits. Bosses understandably want you know that they pay more than just that paycheck you cash.

Under the original Baucus plan, though, you would know how much over the limit your plan is because your company would have to include the value of your health care benefit on your Form W-2.

The national average premium for a workplace-provided family policy is $13,375, according to the Kaiser Family Foundation. But many plans cost more than that, particularly if you live in high-cost parts of the country.

The Center on Budget and Policy Priorities, a Washington, D.C.-based research group that focuses on issues that affect middle- and lower-income individuals, says that based on Baucus' first proposal, one in 10 family insurance plans would be subject to the new excise tax.

Things change: By now you've probably noticed my use of "original" and "first" in talking about the senator's proposal. Since Baucus unveiled his plan (and I blogged about it ) in mid-September, things have been changing.

As soon as Baucus presented his plan, many of his colleagues from both political parties announced they had issues with many of its provisions. The Senate Finance Committee is continuing to sort through more than 500 amendments offered in connection with Baucus' first stab at overhaul.

But even before that tedious process began last week, the chairman modified his original mark, or legislative working document.

Baucus' revision regarding Cadillac plans now calls for bumps in the threshold amount for retirees older than 55 and their covered families, as well as increases for folks who work in high-rick professions, such as law enforcement, fire fighting and emergency medical services. The increases cover both individual and family policies.

Passing along the tax: Now I must make it clear that the tax Baucus seeks wouldn't fall directly on you, the worker with the legislatively-deemed expensive health care plan. Rather, it would be an excise tax on the insurer.

But c'mon. The consumer always pays.

If insurers get hit with an excises tax, expect them to offer only lower-cost plans or raise the premium portion that you and I would pay for plans that exceed the threshold.

Will this latest threshold adjustment be the last? Who knows.

True, the House is starting to warm to the insurer excise tax proposal, especially now that the Congressional Budget Office has reported that a tax on high-end insurance policies offers two fiscal advantages. It would generate about $215 billion over 10 years, and also would make the health care system more efficient by discouraging people from overusing the system.

Dollars aside, though, Congress has an annoying way of defying any crystal ball reading attempts. So if you have a relatively expensive health care policy at work, you need to keep an eye on this provision and your lawmakers' contact information handy.

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