I plan for this blog to be the first in a series of questions I have regarding different aspects of the Patient Protection and Affordable Care Act (PPACA, in the hope that it will help me not only gather more details that I have yet to uncover through further research but also spark some intelligent conversations that can help us all understand, as American citizens and healthcare consultants, the future of healthcare in this country.
While reading a summary explanation of the PPACA I was confused by the following items: 1) 40% excise tax on health coverage in excess of $10,200/$27,500, to raise $32 billion in funding, and 2) Impose a $2,000 per employee tax penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers.[1] Item #1 will not go into effect until 2018 while item #2 will be in effect by 2014. In other words, by 2014, employers who, in 2009, paid an average of $13,375 on a policy covering an employee’s entire family will have to pay only $2,000 to not insure that same employee and his/her family.[2] When considering the scenario that even self-insured employers will save on healthcare costs by simply paying the penalty, what exactly is this “imposition” incentivizing?
Now, let’s consider item #1. By definition, an excise tax is “an internal tax or duty on certain commodities, as liquor or tobacco, levied on their manufacture, sale, or consumption within the country.”[3] It is more commonly known as a tax on luxury goods. Planned to be in effect by 2018, this 40% excise tax will be imposed on “Cadillac” plans that cost more than $10,200 per individual and $27,500 per family for everyone else while $11,850 per individual and $30,950 per family in annual premiums for retirees and employees in high risk professions. “Cadillac” plans, as they are referred to, are often based on age, gender, health, and for an employer-based plan the pooled risk of employees. These plans usually come with low deductibles and generous benefits, so it is easy to take a guess at the impacts of the excise tax. Payers will want to remain below the thresholds and thus will lower premiums. However, since there is no requirement to provide a certain minimum package of benefits to any insured individual or family, payers will decrease benefits or increase co-pays and deductibles, or both. Again, the same question arises: What is this “imposition” incentivizing? Also, if an expensive healthcare plan is required for professionals like firefighters who risk their lives as part of their jobs, is a “Cadillac” plan a luxury good to be excised or a necessity to be provided?
Combined, these two items created the following dilemma for the healthcare consumer. If your employer no longer offers health insurance and your annual household income is more than $88,200 (disqualifying you for a cost-sharing subsidy) but less than $100,000, can you afford healthcare insurance for you and your family? There are more factors to be considered in answering this question. I hope to address those factors in this series through much research.
