“We’re finding that about half of the large employers we work with will be at or above the (excise tax threshold) limits.” Senior Health Benefits Consultant
We promised yesterday to write a series of posts about the “amazing facts” contained in a recent Kaiser Health News article about the excise tax (aka “middle class health tax.”) We suggested yesterday that the larger a health plan, the more likely it is to have plans that would would be “generous” enough to be targeted by the tax. Yesterday we highlighted Mercer’s finding that up to 19% of employer health plans would be affected by the tax in 2013, its first year. That contrasts only slightly with the CBO’s estimate that 19% of plans would be affected by 2016.
Whether you use 2013 or 2016 as the date, however, there’s growing consensus that this tax will quickly affect one out of every five plans. So “Cadillac tax” is a misnomer – unless one car out of every five is a Caddy where you live. Not in my home town, it ain’t …
And, as we explained yesterday, “one out of five” is probably a significant underestimate when it comes to the number of people involved. Since the tax strikes larger health plans disproportionately, more than one in five working families will be affected. That’s why the above quote, from a principal at consulting firm Towers Perrin (and appearing in the same Kaiser News piece), is so important. It’s not scientific polling data, but it confirms the impression I formed after 20+ years in the health and benefits world: Big-employer health plans will be disproportionately hit by this plan.
What does that mean, outside the Beltway and in the real world where most of us live? I think it means this:
Ever since World War II, the United States – along among industrialized nations – has used large employers as guarantors of certain social services like health benefits. That social compact, which has been eroding, will be further damaged if this excise tax becomes law.
Even non-union employees of large corporations frequently choose to work there because of the benefit plans offered. As Jacob Hacker documented in The Great Risk Shift, many large employers have been systematically dismantling the social safety net that attracted employees to them in the first place. How many times have you heard someone say, “I work at XYZ Corporation because of the benefits”?
Even non-union jobs are, in effect, an implicit agreement between the employer and the employee. As we’ll show in a subsequent post, the excise tax will lead to further violations of that implicit agreement and a further breakdown of our nation’s employer-based social safety net. Large corporations have performed the function of providing security to Americans who need or prefer a richer, more stable benefit package. The implications of removing that layer of security are beyond the scope of a single post, but should be the subject of further debate and study.
