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ACA Agonistes
Unions vs. Obamacare

A powerful coalition is forming against one of the more unpopular features of the Affordable Care Act, and even unions are getting into the mix. The New York Times reports on growing opposition to the so-called “Cadillac tax” imposed by Obamacare. This tax, which is slated to go into effect in 2018, puts employers on the hook for individual plans that costs over $10,200 annually or family plans that exceed $27,500. The total amount that an employer pays over those limits for his employees’ plans is taxed at a 40 percent rate.

The tax is well-intentioned. As the NYT reports, it’s aimed at discouraging employers from giving their employees plans that are too generous (and thus help inflate health care spending) and at limiting the tax breaks employers get for providing health care. Wonks on both sides of the political spectrum have long argued that our system of employer-provided health care is seriously dysfunctional, and reducing the tax incentives for it could encourage people to purchase insurance on their own outside the workplace. The hope also appears to be that employers, prompted by the tax to offer less generous health care plans, will spend their money instead on raises for their employees.

These are all very sensible policy aims, but, as so often happens, sensible policy aims aren’t necessarily enough to ensure good outcomes or create widespread support. NYT:

“As we get closer to 2018, we’re starting to hear the organic resistance out there,” said Representative Joe Courtney, a Connecticut Democrat who has proposed a bill to repeal the tax. The bill has gained nearly 130 co-sponsors, including more than 100 fellow Democrats, and with supporters ranging from the U.S. Chamber of Commerce to the A.F.L.-C.I.O. […]

Critics argue that the tax penalizes employees with plans that are expensive rather than generous. “Geography, age, gender and occupation are much more significant in how you come up with the cost of the premium,” Mr. Courtney, the Connecticut representative, said. “It’s such a blunt instrument.”

Employers that have unusually high medical costs, like a premature baby whose care costs $5 million, or that have a work force with a large number of people with expensive illnesses, could also be liable for the tax.

The Times also points to critics who think employers might not always transfer dollars saved on health care over to wage increases as neatly as the proponents of the measure might hope.

This story shows that the debate over Obamacare is nowhere near over, regardless of what the Supreme Court decided about the legality of federal subsidies. In the first place, the ACA hasn’t actually yet even been fully implemented—the tax at issue here doesn’t hit until 2018. To declare the ACA a success—or a failure—when it’s not even fully in place is premature. We don’t know how the law will ultimately shape the health care market, and we can’t until all its provisions are in effect and enough time has passed for any consequences to be felt. Early signs indicate that premiums could rise dramatically over the next few years, and the eventual effect of the Cadillac tax won’t be in evidence for another three or four years—at the earliest.

But there’s even more uncertainty than that, because we don’t only need to wait for the law to come into effect; we also need to see what changes may happen to the law itself. Perhaps the Cadillac tax will be repealed at the urging of the increasing powerful coalition that opposes it, and it isn’t the only ACA provision on the chopping block. Many want the medical device tax to go, and the employer mandate has vocal critics on both sides of the aisle. It seems likely that the ACA will undergo at least some changes in the coming years.

And all of that’s not to mention the fact that health care will continue to be a key domestic policy topic for years to come, for the simple reason that even if the ACA goes fully into effect without any more major hiccups, it won’t solve the underlying unsustainability of our health care system. ACA or not, health care in America costs too much for too little return. A lot more policy work (as well as private innovation) will need to be done to help turn that around (we’ve outlined some ideas here, as well as other places). Until that time, expect continued unrest and more debating.

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  • JR

    Shorter version of this post: As it turns out, while everyone wants to go to heaven, no one wants to die. Everybody likes it when somebody else pays for things….

  • Boritz

    “The tax is well-intentioned. As the NYT reports, it’s aimed at discouraging employers from giving their employees plans that are too generous ”

    Well hell. That’s why people are opposed to minimum wage hikes.  And that’s well-intentioned.

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