by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The so-called “Cadillac tax,” a tax on high-cost health insurance, is supposed to discourage the kind of overly generous first-dollar coverage that encourages too much health care consumption. That tax was deferred until 2018, but Roger Stark reports that private employers are already offering fewer plans that would be subject to the tax:
The non-partisan Congressional Budget Office (CBO) originally estimated the Cadillac Tax would generate $137 billion in new revenue over 10 years. Last year the CBO re-calculated the revenue at $80 billion, because private employers were already shifting to less generous health insurance plans.
But one kind of employer is an exception to the trend: The government itself:
United Benefit Advisors (UBA) surveyed 11,000 employers last year. The report found that government-employer annual health care costs increased at double the rate of health coverage in the private sector. The survey also showed that private-sector employees have larger co-pays and higher out-of-pocket expenses than public workers. Since the recession of 2008, wage freezes have been common for all workers, but government employees have been much more likely to receive increased compensation through expanded health benefits, even as public-sector salaries are held flat.
Stark also reports that the large public employee unions are already bargaining for retaining generous health care benefits in their next contracts, which will run past 2018. [Washington Policy Center, July 2014]
In form, the public employee unions bargain with the government, but such negotiations are often an exercise in self-dealing: Politicians vote for generous government worker benefits, and the government workers in turn vote for the politicians. Expect the Cadillac tax to add to state and local tax burdens.
Yes, that means you and your fellow taxpayers could end up paying the Cadillac tax.