NY Times Editorial Opposes Repeal of Obamacare Cadillac Tax

August 12th, 2015

I’ve blogged at some length about Obamacare’s Cadillac Tax. In short, starting in 2018, Obamacare will impose a 40% excise tax on generous health insurance plans. This tax was essential to make the law score CBO-budget-neutral (a farcical process on a number of levels). But, the necessary consequence of this law–by design–is that many employers will cut back on care, or simply dump employees onto the Obamacare exchanges. Zeke Emanuel (brother of Rahm) wrote quite candidly that the latter was the goal of the ACA. He predicted that 90% of Americans who previously received health insurance through their employers will be shifted onto the exchanges. The Hill reported that 2/3 of businesses twill take steps to evade the Cadillac tax.

A movement is already afoot to repeal the Cadillac Tax. Dutifully, the New York Times editorial board writes in favor of it, explaining that it will get rid of wasteful, profligate (read generous) health insurance plans.

There are good reasons to retain the tax. It makes a start, albeit small, toward reducing the cost of health care by discouraging excessive spending. It would generate some $87 billion over the next decade to finance more coverage for the uninsured, a sum that would either have to be replaced with other revenues or added to the deficit.

The Times is absolutely right about one fact–if the Cadillac tax is jettisoned, the law will create massive deficits and become unsustainable.

The tax should probably be adjusted by Congress to eliminate inequities, but outright repeal would be a mistake that would undermine the viability of the Affordable Care Act.

While it is certainly true that 15 million people have gained coverage, and many poor and sick people are materially better off. Opponents of the ACA must be forthright about these benefits. But what about the other 200 million Americans, many of whom were quite happy with their health insurance, and were promised they could keep it. This was always a lie. Obamacare was designed–as the New York Times champions–to get people off their wasteful plans. The law wasn’t sold as a redistribution and social welfare program, but as a way to make health insurance more affordable for everyone. It won’t do that. A number of my liberal friends, who are otherwise ardent supporters for President Obama, have noted that their premiums keep going up, and aren’t happy about it. While they are moved by the people who benefit from the law, they note that eventually their are getting smaller. When the Cadillac tax kicks in, and millions are shifted off their policies onto the exchanges, we will see how sustained the support for the law remains. The Times observes:

One unanswered question is whether employers that cut back their health benefits to avoid the tax will pass the savings on to workers in the form of higher wages. Many economists think they will, but so far there is little evidence of that happening with businesses that have reduced benefits or increased employee contributions.

Personally, I’ve already spoken with my College’s HR people. There’s no way my plan stays in its current form.

The President has prematurely taken a victory lap and spiked the football too early. Alas, these problems will not manifest until the next presidency. Obamacare’s biggest challenge is still Obamacare.

Update: The Hill reports that businesses are taking a wait-and-see approach to the Cadillac Tax, hoping that it gets repealed. They must know something we don’t.

Businesses are holding off on some changes to minimize the effect of ObamaCare’s “Cadillac tax” to see if congressional repeal efforts are successful, according to a new survey.

The survey from the National Business Group on Health, which represents large businesses including Coca-Cola, Boeing and General Motors, looks at ObamaCare’s 40 percent tax on high-cost health insurance plans.

The tax, which takes effect in 2018, is intended to help slow the rise in healthcare spending by discouraging costly Cadillac plans and making consumers more conscious of their spending.

But there is also broad opposition from businesses, which don’t want the extra tax, and unions, which object to healthcare costs being passed on to workers. Some Democrats in Congress have joined Republicans in looking to repeal the tax as well.

The prospect of congressional action is leading some businesses to hold off making changes to their health plans, the survey finds.

The percentage of businesses replacing their plans with high-deductible “consumer-directed health plans,” which shift more costs to consumers, remained about the same, at 33 percent, despite the impending  tax. Shifting to those plans could allow businesses to avoid being hit by as much of the tax.

“We expected to see more employers would move to full replacement plans next year but it appears many are taking a “wait and see” approach if congressional efforts to repeal the excise tax are successful,” the report states. “If those efforts don’t materialize, we anticipate more employers will adopt a full replacement strategy in the coming years.”