UP to 75% of health insurance plans could pay 40% tax within next 10 years: Another reason why Obamacare won't let you keep your current policy

The 40% tax on so-called Cadillac health insurance plans will hit the vast majority of plans over the next decade.  Here is one of the finer points that was missed in the health care debate: the "Cadillac" tax wasn't indexed for inflation.  From the NY Times:
. . . Bradley Herring, a health economist at Johns Hopkins Bloomberg School of Public Health, suggested the result would be more widely felt than many people realize. “The reality is it is going to hit more and more people over time, at least as currently written in law, ” he said. Mr. Herring estimated that as many as 75 percent of plans could be affected by the tax over the next decade — unless employers manage to significantly rein in their costs. . . .
The trend is accelerating. The percentage of employers revising their plans as a result of the tax has increased to 17 percent this year from 11 percent in 2011, according to a survey of United States companies released this month by the International Foundation of Employee Benefit Plans. . . .
This makes no economic sense.  Suppose that you want to get rid of tax credits for health insurance.  First, you aren't getting rid of them.  You are replacing these credits with income based transfers under Obamacare.  Second, the 40% tax rate is unrelated to the income tax rate that people are paying.  This 40% tax rate means that lower income tax rate people will face greater disincentive to get Cadillac plans than higher income individual.  Obamacare is making the system amazingly complicated.

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Blogger mrpeter821@aol.com said...

What is an "income based transfer". Is there a dictionary or website I can find the definition in? Thanks and keep up the good work.

5/28/2013 8:33 AM  
Blogger John Lott said...

Dear mrpeter821:
"Income based transfer" is that the size of the government transfer is based on a person's income. I hope that helps. Thanks.

5/28/2013 8:02 PM  

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