ObamaCare

 

Looming health care reduction on horizon for millions of employer-insured Americans

By Jennifer Popik, JD, Robert Powell Center for Medical Ethics
One of Obamacare’s many mechanisms that is intended to drive down health care spending is facing a growing chorus of opposition.

Critics of the “excess benefit tax” include over half of Members of the House of Representatives (both Democrat and Republican), major unions, and even the top two Democratic presidential candidates.

The provision at the heart of the controversy is an enormous 40% excise tax on employer-paid health insurance premiums above a governmentally-imposed limit that does not allow for medical inflation. The excess benefits tax will have its intended result of effectively imposing a price control on health insurance premiums.

In the very near future, millions of Americans are going to start to see concrete reductions to the plans they once enjoyed as a part of their employment compensation.
In an August 31, 2015, Politico piece written by Brian Faler, “’Cadillac tax’ could wreck popular medical accounts.” Faler explains

While the Obama administration contends the tax would apply to only a relatively narrow slice of people — thus, the Cadillac tax nickname — it will hit a growing number of companies because it’s indexed to a relatively slow measure of inflation.

While the tax will not take effect until 2018, insurance plans prepare many years ahead of time and are trying to prepare employers now for the looming changes. There are estimates that 33 million Americans will feel the initial round of reductions. And if this tax is not rescinded, Faler explains,

By 2028, more than half of all employers could potentially face the tax, according to a report this week by the nonpartisan Kaiser Family Foundation. The tax applies not only to traditional health insurance but to a swath of other benefits, including supplemental insurance plans, flexible spending accounts and, potentially, on-site clinics that employers set up for their workers.

The excess benefits tax will cap for the first time the value of tax free health care benefits employers may provide. Tax free health care benefits have allowed employers to stay competitive by offering employees the hard-earned benefits of generous health care coverage.
But without Congressional action, this is about to change dramatically.
As a result of the tax, insurance companies will be forced to impose increasingly severe restraints on policy-holders’ access to medical diagnosis and treatment–limits that will not prevent setting broken legs and giving flu shots, but will make it harder and harder to get the often-expensive medicines, surgery, and therapy essential to combat such life-threatening illnesses as cancer, heart disease, and organ failure.
David Nather, in his September 30, 2013, Politico article “How Obamacare affects businesses – large and small,” explained the coming phenomenon:

For one thing, the thresholds [at which the excess benefits tax will be imposed] were set in 2010, and even though the law has a method for raising them if there’s a lot of growth in health care spending, employers are still concerned that they’ll get busted for offering fairly standard plans… [Thresholds will] be linked to the increase in the consumer price index, but medical inflation pretty much always rises faster than that. Think of the Cadillac tax as the slow-moving car in the right lane, chugging along at 45 miles per hour. It may be pretty far in the distance, but if you’re an employer and you’re moving along at a reasonable clip in the same lane — say, 60 miles per hour — and you don’t slow down, you’re going to run smack into it.

Analysts predict that popular flexible spending accounts will be the first item on the chopping block. Faler writes,

Flexible spending accounts, which allow people to save their own money tax free for everything from doctor co-pays to eyeglasses, may vanish in coming years as companies scramble to avoid the law’s 40 percent levy on pricey health care benefits. “They’ll be one of the first things to go,” said Rich Stover, a health care actuary and principal at Buck Consultants, an employee benefits consulting firm. … That fact alone could dramatically alter the political equation surrounding Obamacare, potentially blindsiding middle-class voters who may be only vaguely aware of the Cadillac tax.

While President Obama would almost certainly veto any measure to eliminate the tax, this is sure to be an issue for the next President. Over half of U.S. House Members have co-sponsored either a Democratic or Republican bill that rescinds the tax. According to the Politico article,

Already, it’s become an issue in the Democratic presidential primaries, with Sen. Bernie Sanders vowing to junk the tax and Hillary Clinton saying she’s open to changes. “I worry that it may create an incentive to substantially lower the value of the benefits package and shift more and more costs to consumers,” she told the American Federation of Teachers. Republicans, meanwhile, invoke the tax as one of many reasons to repeal the entire Affordable Care Act. “Obamacare continues to overpromise and underdeliver,” said Sen. Dean Heller (R-Nev.), who also said he is working on legislation to address the issue.

Obamacare is slowly beginning the process of destroying much that is valuable in the health care system which has evolved to serve Americans.

It is wrong to suppose– as does Obamacare– that in order to provide health care to those with low incomes the government must limit health care for others, or that the government must “protect” ordinary Americans from using too many of their resources to save the lives of their family members by imposing arbitrary limits on what he or she is allowed to spend for health insurance and health care.

But that is just what the excess benefits tax intends to do–squeeze out plans that allow people access to sometimes expensive, but lifesaving, medical care.
Contrary to conventional wisdom, in the aggregate and over the long term we Americans can afford to devote an ever growing proportion of our income to saving our lives and promoting our health, because increasing productivity in producing other goods and services frees up resources that enable us to do so. See nrlc.org/uploads/medethics/AmericaCanAfford.pdf .

As more money is spent on health insurance by employers and individuals, cost-shifting keeps pace in making available health care for those who cannot themselves afford to pay its full cost. As NRLC has proposed, incorporating the cost of subsidies for growth in health care spending on behalf of those who genuinely cannot afford it into what employers and individuals pay for their own health insurance would result in a self-executing restraint on unsustainable growth in health care spending, while avoiding Obamacare-type arbitrary government limits that suppress what we are collectively able to, and desire to, spend to preserve the lives and health of our families.

Details can be found at nrlc.org/uploads/medethics/ObamacareAlternativeNRLC252015.pdf
For documentation on the way medical inflation exceeds the average rate given by the consumer price index (CPI), see nrlc.org/uploads/medethics/MedicalInflationOutpacesCPI.pdf .

Source: NRLC News