Updated report: “Cadillac” tax would hit “pick-up trucks”

The Senate Finance Committee's health reform bill includes a tax on so-called "Cadillac" health plans, those that cost substantially more than average. An updated report by CWA's research department shows that the Finance Committee's benefits tax would hit 31 million taxpayers -- one-third of all health plans -- by 2019.  That means it cuts deep into the middle class. Although the tax would be collected from employers or insurance companies, they are expected to pass the impact on to workers, in higher premiums, higher out-of-pocket charges or reduced benefits.

"The Senate Finance Committee excise tax is not a tax on 'Cadillac' plans; it's a pick-up truck tax. It taxes plans that are of great utility to millions of working Americans," said CWA President Larry Cohen. "Health care reform should be paid for by making employers who don't pay, pay."

Middle-income taxpayers (those making $50,000 to $75,000 a year) in plans that get hit by the tax would, in effect, have a 1.4 percent tax increase.  For those making a million dollars a year in plans hit by the tax, the increase would be just 0.1 percent.

The new report is consistent with previous research showing that "Cadillac" plans are largely a myth - except for those available to corporate executives.  Plans with higher premiums generally don't have outlandish benefits.  Premiums are high because the workers are older, because the employer is small, because the employee group performs dangerous work that leads to more need for care (such as firefighters or coal miners), or because the workers happen to live in high-cost cities and rural areas.

The latest CWA report finds:

• One-quarter of taxpayers making between $50,000 and $75,000 would be hit by the tax.
• By 2019, the average tax increase for each affected taxpayer would be $1,318 a year. Between 2013, when the tax would take effect, and 2019, the total impact would be $7,640.
• The tax impact on a typical CWA member, with the most popular health plan, will be more than $19,000 over ten years.

CWA believes there are better ways to pay for health reform than a massive new tax on working families.  Three of them are contained in H.R. 3200, the House health reform bill endorsed by CWA: making employers pay a penalty if they don't pay their fair share of health costs; modestly increasing income taxes for the richest 1.2 percent of Americans; and a strong public health insurance option to cut costs.  Also, President Obama has proposed limits on tax deductions for families making more than $350,000 a year.