Thursday, January 14, 2010

The Cadillac plan tax compromise

The New York Times reports tonight that

White House officials, Democratic Congressional leaders and labor unions said they had agreed to an increase in the thresholds at which policies would be [subject to the 40% excise tax]: to $8,900 for individual coverage [from $8500] and $24,000 for family coverage [from $23,000]. Moreover, they said, starting in 2015, the cost of separate coverage for dental and vision care would be excluded from the calculations.

In addition, they said, health plans covering state and local government employees and collectively bargained health plans would be exempted from the tax until 2018.
This transition period addresses the concerns of schoolteachers and other public
employees who had denounced the tax.

For people in certain high risk occupations, including police officers and construction workers, the thresholds would be higher: as high as $27,000 for family coverage.

In addition, Richard L. Trumka, president of the A.F.L.-C.I.O., who led a team of labor leaders negotiating with the White House, said the thresholds would be increased for “age and gender,” to reflect that premiums may be higher for health plans with large numbers of women, older workers and retirees.

The thresholds will increase annually by the Consumer Price Index for Urban Consumers plus one point which historically has been lower than the medical cost inflation rate.

Other fees, e.g., on medical devices, reportedly will be increased in order to offset this revenue loss. According to the Times report, the compromise has not been vetted yet with the membership.

The last component of the compromise may benefit FEHB plans because overall enrollment is just about evenly split between employees and annuitants (or retirees). Also excluding dental and vision coverage from the premiums counted toward the threshold will be helpful to FEHB plans because hundreds of thousands of federal employees and annuitants have opted for FEDVIP coverage. We will have to wait and see.

The House and Senate leadership is aiming to send a consolidated healthcare reform bill to the Congressional Budget Office for scoring tomorrow. We may not get a chance to see the bill until the scoring is completed.

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