Congressional leaders just agreed to a budget that would keep the government open through September 2016. I was happy to hear the government was not going to shut down. I was much less happy to hear about the fate of provisions supposed to fund the Affordable Care Act (ACA). The ACA – costing $1.2 trillion over 10 years – was supposed to ‘mostly’ pay for itself. Revenue was to be generated (in large part) by a series of taxes on a variety of different sources. These taxes did not fare so well in the current budget.
The ACA took aim squarely at high cost employer-sponsored plans. Economists believe that since employer health insurance is tax deductible, high cost plans proliferate as a mechanism to provide a tax free benefit to employees. These expensive plans are expensive because they cover most of the cost of medical care, insulating the patient from the actual cost of medical care. The ACA imposed an annual 40% tax on plans with annual premiums exceeding $10,200 for individuals and $27,500 for families to be paid by the insurers. The results were to be two fold: One, create a disincentive for employers to offer ‘cadillac’ plans, and two, generate revenue to pay for the ACA. A broad coalition composed of democrats and republicans lobbied to defeat this tax.