The Senate’s healthcare legislation includes a tax on so-called “Cadillac” health insurance plans, with a 40 percent tax on insurance premiums of more than $8,500 for an individual, and $23,000 for a family. However, experts agree that this tax would impact not only a few wealthy Americans, but many more in the middle class. A recent Associated Press poll shows that 57 percent of Americans favor an income tax on the wealthy, but most Americans do not know if the new tax would affect their insurance.

Apart from whether the tax is fair, it could also bring about back-door rationing of health care. The idea is that taxing high-cost plans would discourage health care spending by discouraging insurance companies from offering comprehensive coverage. “I don’t think most Americans know that the cost of their insurance could go up as a result of this legislation because we’re making it more fair for people who have been treated unfairly in this system,” said John Desser, a health policy adviser to Sen. John McCain during his campaign against President Barack Obama.

Taxing “Cadillac” Plans Raises Fairness (Austin TX American-Statesman 11/24/09)

December 2, 2009