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Senate Health Care Legislation: Making Your Insurance Worse – By Design

Jon Walker/FDL

The sole defense of this massive corporate giveaway, formally known
as the Senate health care reform bill, is that it would still do some
“good,” helping millions of the uninsured. Unfortunately, the bill
would dramatically worsen the quality of current insurance coverage for
tens of millions Americans, thanks to the new excise tax on insurance
plans. It is unlikely that any of the remaining “good” in this bill
will outweigh the massive amount of harm.

Most of the “help” this bill will do is dubious at best. Help is
being defined as giving insufficient subsides to Americans now forced
by the government to buy extremely expensive, poorly regulated, junk
insurance. Without banning annual limits and an extremely high out-of-pocket cap (which thanks to a massive loophole
is not really capped at all), the insurance regulations are basically
meaningless. Having this new, mandated “coverage” will not stop you
from being bankrupted by accumulated medical debt should you get
seriously ill. Insurance that does not protect you from financial ruin
if you get sick makes a mockery of the entire concept health insurance.

The harm this bill will do thanks to the excise tax on
employer-provided insurance benefits is enormous. The health care bill
is designed with the goal of making millions of middle class Americans’
health insurance coverage much worse. That is not a bug, it is a

The excise tax is meant to force your employer to cut back your
insurance benefits, reduce your coverage, and increase your co-pays and
deductibles. This is not the conclusion of partisan think tanks,
bloggers, or activists, this is the conclusion of the non-partisan
Congressional Budget Office (CBO) and the Center for Medicare and
Medicaid Services (CMS). They CBO concluded:

[A]n estimated 19 percent of workers
with employment-based coverage would be affected by the excise tax in
that year [2016]. Those individuals who kept their high-premium
policies would pay a higher premium than under current law, with the
difference in premiums roughly equal to the amount of the tax.
However, CBO and JCT estimate that most people would avoid the cost of
the excise tax by enrolling in plans that had lower premiums; those
reductions would result from choosing plans that either pay a smaller
share of covered health care costs (which would reduce premiums
directly as well as indirectly by leading to less use of covered
medical services), manage benefits more tightly, or cover fewer service

The CMS also concluded:

In reaction to the tax, many
employers would reduce the scope of their health benefits. The
resulting reductions in covered services and/or increases in employee
cost-sharing requirements would induce workers to use fewer services.

Because plan benefit values would generally increase faster than the
threshold amounts for defining high-cost plans (which are indexed by
the CPI plus 1 percent), over time additional plans would become
subject to the excise tax, prompting those employers to scale back

To translate, they both conclude the tax will effectively force
employers to scale back the health insurance benefits they offer in
order to avoid the excise tax. This can be done by reducing what
benefits the plan covers and/or increasing cost sharing (i.e. higher
co-pays, higher deductibles, higher out-of-pocket limits, and possibly
lower annual limits). If you have a good employer provided health
insurance plan, it will be dramatically scaled back. Contrary to
Obama’s direct promise, you will not be able to keep the coverage you
currently have, and that is by design.
The real problem with this excise tax on what are dubbed “Cadillac”
plans is that it is not indexed to health care inflation. In the first
few years, it will only affect high-end plans, but, after a decade, it
would force employers to make the vast majority of employer-provided
health insurance plans much worse. A decade after reform starts most
Americans will have much worse health insurance coverage as a result.

Instead of paying for reform with a tax on the richest one percent
of Americans, like the House bill, the Senate bill pays for reform by
worsening the insurance coverage for the vast majority of Americans.
Ruining the coverage of most working class Americans to get the money
for a huge corporate boondoggle that will only enrich the insurance
companies while not stopping medical bankruptcy in this country does
not sound like a good trade.

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