Congress is back at it on Capitol Hill this week, and the Supreme Court joins them as tomorrow is the first Monday in October.
The tax on employers isn’t economists’ first choice when thinking about solutions. Many would prefer an individual tax cap on the health insurance exclusion, where the value of health insurance over a certain amount would be taxed as income at the person’s marginal tax rate. But Aaron pointed out how tricky an individual cap would be to design, since health care costs go up as people get older and what people spend on health care can vary by geography. But even though many economists think the Cadillac tax may be a “second-best” solution, they see it as a critical step toward bringing down health care spending.
The excise tax is hideously complicated, and the FEHBlog does not understand how it will control costs. Yes, the excise tax should incent employers to end frill coverage like flexible spending accounts and other benefits not mandated by the ACA, but this is nickel and dime stuff. Although health insurance is mandated by the ACA, health insurance will bear the brunt of the excise tax. The ACA regulators cannot stop themselves from adding new mandates to employer sponsored coverage, like embedding a self only out of pocket limit in other than self and family coverage, which drives up the cost of health insurance closer to the excise tax thresholds. Congress has to step up to the plate on this one. The FEHBlog’s suggestion is to tax 1/2 of the premiums on high wage earners – the same rule applicable to small business owners.
The Washington Post included today an interesting interview with the CEO of big pharma manufacturer Novartis. Take a gander.