11 Feb 2014 Hatch-Burr-Coburn Still A Cadillac Tax Plan

About two weeks ago I criticized the Hatch-Coburn-Burr health care plan for the way it treated the tax exclusion for employer-based health insurance:

The Hatch-Burr-Coburn…“caps the tax exclusion for employee’s health coverage at 65 percent of an average plan’s costs” (italics added).  In 2013 the average employer-based plan cost about $5,884 for an individual and $16,351 for a family (see page 2).  Under Hatch-Burr-Coburn, any individual would be taxed at the marginal income-tax rate on any dollar of his heath plan that exceeded $3,825 ($5,884 multiplied by 65%).  For a family, it would be any dollar that exceeded $10,628.

In short, this legislation doesn’t just hit “Cadillac” plans.   It also taxes Honda Civic, Ford Focus and Toyota Corolla plans.

After talking with some Senate staffer last week, I learned that the wording in the proposal was incorrect.  The cap will be set at 65% of a high-cost plan.   For the sake of argument, let’s say that the expensive plan will be set at 2.5 times the average plan—so that the expensive plan would be $14,710 for a single person and $26,565 for a family. That means the cap would be $9,561 ($14,710 multiplied by 65%) for a single person and $17,267 for a family.

That’s an improvement, but how much of one?  One could argue that it’s not really a Honda Civic plan tax plan anymore, but it’s still very much a Cadillac one.  As I noted last time, ObamaCare’s Cadillac tax has not proven popular.  It’s also similar to 2008 plan put out by the John McCain Campaign that Democrats attacked as a tax increase.

One can be charitable toward this plan in that perhaps it provides a foundation on which to build true health-care reform.  But a lot of building is required.