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Proposed Health Care ‘Excise Tax’ a Tax on the Middle Class |
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The Senate Finance Committee’s 40 percent excise tax on so-called “Cadillac” health care plans would hit 37 percent of family health insurance plans and 41 percent of single plans by 2019, according to an analysis of the committee’s original health care reform bill conducted by the congressional Joint Committee on Taxation (JCT).
By 2015, according to this analysis, the excise tax would slam 24 million households, growing to 39 million households by 2019. Nearly one-third of middle-class households making between $50,000 and $100,000 would be affected by 2019.
According to a just-released Communications Workers of America (CWA) report on the JCT estimates, the excise tax-part of the health care reform legislation that the Senate Finance Committee passed on Tuesday,
will have a dramatic effect on those plans forcing steep reductions in benefits, shifting costs to workers, and a significant increase in taxes on millions of middle-class families.
CWA President Larry Cohen said that the proposed excise tax is not a tax on “Cadillac” plans.
It is a middle-class tax. It hits 40 percent of health plans and will lead to more cost-shifting to workers. Rather than make those employers who already pay toward their workers’ health coverage pay more, let’s make employers who don’t pay, pay.
In promoting the excise tax, backers portray it as a way to cut health care costs by reining in gold-plated, extravagant health care plans that offer spa treatments, cover elective cosmetic surgery and other luxury care.
Far from being extravagant, most of these plans that fall under the Finance Committee’s tax have high costs because of factors beyond the control of the plan-sponsors or workers covered.
They cover workers in high-cost areas of the country. The health care use of the workforce may be higher because of factors such as old age, poor health status or large numbers of women of child-bearing age. Small businesses pay more because of smaller risk pools.
The same family plan could cost well under $15,000 in one place and more than $20,000 in another, depending upon the people you work with or even where you live.
The 40 percent excise tax would be levied on insurance company health plans and self-insured plans offered by companies to their workers. The excise tax would be assessed on the value of health care plans exceeding $21,000 for family coverage and $8,000 for individual coverage (with some adjustments), starting in 2013.
The CWA report—”Health Care Excise Tax = A Big Middle Class Tax Increase“—cites estimates by the JCT that between 2013 and 2019, households impacted by the tax would pay an average of $7,800 in extra taxes.
Insurance companies and self-insured employers will dramatically reduce health benefits in order to get the cost of their health plans below the threshold and avoid the tax—essentially shifting the pain to working families by providing them with less comprehensive coverage.
The JCT and the Congressional Budget Office (CBO) assume that in response to a 40 percent excise tax, employers will cut benefits to get the price of their plans below the threshold and then increase workers’ wages to offset those cuts. Workers will pay income and payroll taxes on these new wages….In effect, workers’ health care benefit will be taxed as new income.
The CWA report also points out that the excise tax is highly regressive, hitting working families much harder than the wealthy. According to an analysis of the JCT data by Citizens for Tax Justice (CTJ), middle-income households making $50,000 to $75,000 would see their taxes increase by 2 percentage points, whereas millionaires would see their taxes increase just 0.1 percent.
The CWA report explains that JCT’s analysis is based on the original Senate Finance Committee bill, which was slightly modified in committee. JCT has reportedly updated its analysis to reflect those modifications, and now estimates that 33 percent of family plans will be affected by 2019.
Neither the health care reform legislation passed by the Senate Health, Education, Labor and Pensions Committee, nor the House legislation, tax workers health care benefits.
And in full-page newspaper ads earlier this week that set out “Our Bottom Line for Health Care Reform,” the AFL-CIO and two dozen unions put it this way:
A new tax on the middle class is unacceptable.
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