We’ve read some recent reports that President Obama prefers the idea of taxing so-called “Cadillac plans” over taxing the wealthy to pay for the proposed healthcare overhaul. The Cadillac plan tax is part of the healthcare bill which passed in the Senate; the bill which was approved by the House of Representatives included a tax on the wealthy.
“Cadillac plans” refer to the most expensive health insurance plans, typically ones that cost more than $8,000 per individual and over $20,000 per family. The idea is that taxing the most expensive plans will discourage the use of those plans. Studies have shown that Cadillac plan members are no healthier than those in more basic plans, and many people believe that the generous coverage that Cadillac plans encourages reckless medical spending that drives up healthcare costs. The reasoning is that taxing Cadillac plans will help make everyone’s healthcare costs more affordable.
We’ll have to stay tuned on the outcome of the House and Senate negotiations. In the meantime, you should bear in mind that any tax on insurance plans would almost certainly be passed onto consumers in higher premiums. While any Cadillac plan tax would certainly catch plush plans like those enjoyed by the Goldman Sachs executives, they are also likely hit a much wider spectrum of consumers. If you are in a plan with older members or those with pre-existing conditions, your higher-premiums could also push you into the Cadillac plan tax territory. Union plans many of which include members who are not yet eligible for Medicare are also likely to get hit, as well as plans located in higher-cost areas of the country like California and New York. Health insurance plans catering to small businesses and the self-employed could also be affected.
In addition, even if your health insurance plan is not initially hit by any taxes, if insurance premiums continue to rise as they have in the last few years, your health insurance plan may very well be hit by taxes in the near future.
Something to keep in mind!
To help you keep track of issues like the proposed Cadillac plan tax that might affect you, we have a mini-glossary of common healthcare debate terms here:
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