Attack of the Cadillac Tax
Picture a union worker pulling up in a Cadillac, valet-parking at the city’s most prestigious hospital, and pulling out the gold card for lavish care.
Acupuncture, plastic surgery, massages: all covered. The worker doesn’t pay a cent.
If you listened to media coverage of the “Cadillac tax” embedded in the Affordable Care Act (ACA), you’d think this scenario was real.
City government leaders are raising the alarm over the tax. Soon, they warn, insuring public employees will cost taxpayers even more.
The tax will work like this: starting in 2018, for any plan that costs more than $10,200 per year for an individual or $27,500 for a family, the employer must pay 40 percent on the amount over the limit. (Those numbers will be adjusted upward for inflation, once.)
If a plan cost $28,000, the employer would pay 40 percent of $500—that is, $200. It’s assumed employers would pass the cost on to workers.
But the fears about the tax are exaggerated. The national average cost of a family health plan today is $15,745; an individual plan, $5,615.
In the Northeast it’s higher. In New York City, officials told reporters they pay $18,249 for a family. But that’s still well below $27,500.
For family plans to hit the cap, rates would have to go up 72 percent nationally, or 50 percent in New York: unlikely. In the last six years, premiums increased 30 percent—still a hefty amount, but the recent trend is for the rate of increase to slow down.
Some health plans could approach the cap by 2018, but they’re not the norm. So why are employers getting hysterical?
BULLY’S SCARE TACTIC
It’s just another scare tactic to bully unions into accepting inferior plans that cost employers less.
Today’s plans are not lavish. They cover basic services: doctor visits, surgery, prescriptions. It’s not greedy to have a decent plan, without paying premiums out of your paycheck, or out of pocket for services.
Calling them Cadillac plans or gold-plated plans is a rhetorical trick. The point is to pit non-union workers, who have to pay more in premiums and out-of-pocket costs, against union workers, who have successfully negotiated good health plans over the years.
Unions don’t control the total costs of our health plans, which are negotiated between our bosses and insurance companies. We can’t predict how costs will go up. Why should we agree to concessions now, because of an increase that may or may not happen five years from now?
And when costs do increase, that certainly doesn’t mean the quality of our plan improves.
The mainstream press has been carrying employers’ water on this issue. In May the New York Times implied a West Coast hospital had to cut benefits to avoid the Cadillac tax.
In reality, the health plan in question came nowhere near the $27,500 threshold. Managers just made the cuts because they wanted to—and because they could.
Of course, to actually bring health costs down, we’d have to take profit out of the equation. Medicare for All, paid out of taxes, would save half a trillion dollars the first year, a recent study found.
Slashing decent benefits won’t save money. It will just shift more costs onto workers, the one group who can’t shift them onto anyone else.
“Slingshot” is a new column where Labor Notes staffers take turns taking aim at issues of the day.