12 Jan 2010

Employer Health Costs Do Not Drive Wage Trends

In the dysfunctional health insurance market, high-cost does not equal high-value; and it is not comprehensiveness of coverage that is the primary predictor of who will be affected by the excise tax, rather it is the size of the firm they work for or the age of their co-workers. The fact that Chevy plans are about as likely to be taxed as Cadillac plans is one reason to be cautious about relying on such a tax.

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12 Jan 2010

Employer Health Costs Do Not Drive Wage Trends

Financing health care reform will be a prime subject of discussion among the Senate and House conferees, specifically how much the financing relies on a tax on high-cost health plans. Supporters of this tax label these “Cadillac” health plans and make the assumption that they provide comprehensive (even lavish) coverage that requires very low out-of-pocket costs from beneficiaries. However, in the dysfunctional health insurance market, high-cost does not equal high-value; and it is not comprehensiveness of coverage that is the primary predictor of who will be affected by this tax, rather it is the size of the firm they work for or the age of their co-workers. The fact that Chevy plans are about as likely to be taxed as Cadillac plans is one reason to be cautious about relying on such a tax. Bivens and Gould (2009) document this as well as other reasons to prefer the more straightforward, progressive financing in the House bill.

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