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I has a bit of insomnia last night, and for some reason my thoughts drifted to the excise tax.  I worried a bit about how something that is already framed as a tax on health care benefits would be a great campaign point for the GOP in 2010 and, even worse, a possible "Read my lips" moment for Obama in 2012.  

So, I fretted and worried, and then began casting around for a solution.  This is what I came up with, and I wanted to throw it out there for others who have a deeper understanding of the issues to ponder, comment, etc.

1.  Throw the "excise tax" in the trash heap.  Anything that has already been framed as a tax on health care benefits, esp. those that might reach the middle class, is political suicide.

I understand from TPM and other outlets that Obama's chief concern is the bring down heath plan costs with the tax.  It makes some sense:  employers/consumes will avoid higher costing plans that trigger the tax, meaning insurers will be compelled to lower their plan rates.  

But this might work too:

2.  Impose a "penalty" at the same rate as the now-trashed tax on any health insurer that charges above a certain threshold amount, say $24,000, for a plan.  

Ah, but isn't this the same thing, you ask?  Well, not really.  First, on the surface, it's more direct.  The health insurer doesn't wait for market competition (and all of its elegant yet unrealistic abstractions) to force down it's costs.  Rather, they will decrease costs immediately to avoid the penalty threshold.  

But, perhaps there would be concern (and GOP criticism) that health plans would just some how pass the cost to consumers.  Well, two points: First, they can't ever charge more than the threshold rate, so we've got a cap on how high they can go.  And, second:

3.  Any insurer that attempts to pass along the penalty of a health care plan to the consumer(s) will forfeit the entire amount of the health care cost to the U.S. Treasury.

In other words, if an insurer charges $25,000 for a plan, gets hit with fee of $X, and then tries to spread that $X through higher co-pays, they have to give $25,000 to the feds.  The prospect of a full cost penalty, especially aggregated, should be a big enough deterrent to prevent any pass through (and any charges of higher costs).

Of course, this might be hard to ferret out, so:

4.  For any person who exposes pass through cost measures by an insurer, give them 10% of the forfeiture amount.

So, now we have a huge incentive for rank-and-file insiders (and perhaps numbers savvy consumers) to discover and rat out insurers that try to surreptitiously pass the cost of the penalty to the consumer.  For example, if an insurance company is charging $25,000 and some employee blows the whistle, that employee gets 10% of that $25,000.  That might not sound like a lot for someone that is worried about losing his/her job, but in the aggregate, it would be quite a nice severance package.  If the insurance company is doing this to just 100 of its customers, that 10% of $2,500,000 -- or $250,00.  So I think this creates the incentive to blow the whistle ... meaning that insurers will be scared out of their pants to even try to pass it through.

The only criticism I can think of is the GOP screaming "cost control!" or something like that.  But I'd love to see them try pleading to voters that the poor insurance companies need to freedom to charge exorbitant rates.

Thoughts?

Originally posted to VirginiaDem on Fri Jan 15, 2010 at 08:06 AM PST.

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Comment Preferences

  •  I actually don't think it's a big deal (0+ / 0-)

    politically, that is. It's too arcane. It's a tax on insurers, anyway. The GOP has to explain how the tax gets passed onto certain small slivers of the middle class in certain situations. And democrats respond that the tax is designed as a cost control measure against high premiums (a half-truth, but a good talking point).

    Good diary though.

    LOOK IT! I WROTE A COMMENT ON BIG ORANGE SEXY TIME!!!!

    by Mark Warner is God on Fri Jan 15, 2010 at 08:12:04 AM PST

    •  Let me add (0+ / 0-)

      I don't think the mandate is that big of a deal politically either. It's pretty easy to explain. If people don't have insurance, we all pay for their emergency room visits.

      LOOK IT! I WROTE A COMMENT ON BIG ORANGE SEXY TIME!!!!

      by Mark Warner is God on Fri Jan 15, 2010 at 08:13:26 AM PST

      [ Parent ]

      •  Premiums jumped as much as 45% THIS YEAR (1+ / 0-)
        Recommended by:
        Sunspots

        for many people.. Anyone who doesn't see this tax as effecting them is crazy.

        Plus, the Dems will lose in 2010 without a plan that starts now. Toe only thing that we can start fast is Canadian-style medicare for all.

        SO, the only way out of this mess is single payer.

        Maybe that was Obama's real plan all along? Show us BY DOING how extremely messed up every other option is!

        Premium hikes for small businesses in Massachusetts were 20-45% this year. Keep that in mind with this excise tax!

        by Andiamo on Fri Jan 15, 2010 at 08:29:40 AM PST

        [ Parent ]

        •  I think you have very little understanding (0+ / 0-)

          of the history of Canadian healthcare if you think that we could switch to Canadian-style Medicare overnight, nationwide. There was an almost 10 year delay between Saskatchewan introducing single payer and nationwide single payer, and it required some aggressive moves by the Saskatchewan government to break a strike by shipping in Doctors from Britain, the USA and other Canadian provinces.

          What's more, the Saskatchewan government which introduced single payer had run specifically on the promise to do so. And they lost the next election because of the divisions that had been aggravated by the strike.

          In America, 60% of bankruptcies are because of medical bills, and 80% of those people had health insurance

          by sullivanst on Fri Jan 15, 2010 at 08:38:28 AM PST

          [ Parent ]

          •  November 1, 2010 - We could ship in doctors.. (0+ / 0-)

            that would work..

            We absolutely have to have something in place, even if its just starting, by November 1, 2010

            BAD, unaffordable healthcare and selling "hope" of fixing it is "the gift that keeps giving" to Dems vote wise.

            by Andiamo on Fri Jan 15, 2010 at 09:59:28 AM PST

            [ Parent ]

            •  Somebody from North Dakota (0+ / 0-)

              says they got a 45% hike.. That is happening everywhere..

              We have no choice, they can't do this.

              BAD, unaffordable healthcare and selling "hope" of fixing it is "the gift that keeps giving" to Dems vote wise.

              by Andiamo on Fri Jan 15, 2010 at 10:01:29 AM PST

              [ Parent ]

    •  The GOP will stop at "tax" and leave it at that.. (2+ / 0-)
      Recommended by:
      sullivanst, Sunspots

      ..... forcing Democrats to come up with this convoluted explanation that ultimately makes no sense and the listener's eyes glaze over with a "you have got to be kidding me" look.  

  •  I think one criticism... (1+ / 0-)
    Recommended by:
    Sunspots

    of pushing down costs with this tax is that it will also reduce coverage. So the direct tax on insurance companies might make them lower costs but also reduce what they cover or raise co-pays.

    Sometimes you win. Sometimes you lose. Sometimes it rains.

    by gooners on Fri Jan 15, 2010 at 08:13:50 AM PST

  •  You don't address loss of coverage (1+ / 0-)
    Recommended by:
    Sunspots

    Insurers would sell, and employers would buy, policies with less generous coverage.

    I like your #1.  You should just leave it at that.

    Excise the excise tax.

    by Paleo on Fri Jan 15, 2010 at 08:14:03 AM PST

  •  less coverage... (1+ / 0-)
    Recommended by:
    Sunspots

    ... didn't think of that.

    •  But that's the entire point of the excise tax (1+ / 0-)
      Recommended by:
      Sunspots

      It's completely based in a notion that health care utilization is driven purely by supply-and-demand economics, and that if you increase people's copay, they'll use less health services. It's designed to replace zero- or very-low-cost-sharing plans with higher cost-sharing plans.

      That's why I can't support it. The entire notion that people receive medical treatment solely because it's cheap is garbage. People receive medical treatment because they need it. The only way to reduce utilization by controlling cost is by preventing people from receiving procedures and/or medications their Doctors advise - also known as needed care.

      BTW, 2 really isn't a change at all. It's simply a change of name. The excise tax is already levied against insurers.

      In America, 60% of bankruptcies are because of medical bills, and 80% of those people had health insurance

      by sullivanst on Fri Jan 15, 2010 at 08:29:47 AM PST

      [ Parent ]

      •  People who have health problems need an exemption (0+ / 0-)

        It also needs to be fixed so it doesn't bankrupt businesses with older workers.

        They seem so fixated on preserving job lock. Why?

        BAD, unaffordable healthcare and selling "hope" of fixing it is "the gift that keeps giving" to Dems vote wise.

        by Andiamo on Fri Jan 15, 2010 at 09:48:21 AM PST

        [ Parent ]

  •  And then you woke up ........... (3+ / 0-)
    Recommended by:
    Andiamo, Sunspots, laker

    ...... and realized Obama was still in the White House.  ;)

    Yanno, the truly ironic thing about all of this is the real cost cutters were tossed away in the very beginning.  

  •  tax (1+ / 0-)
    Recommended by:
    laker

    This change should not be done in the form of a tax.

    i.e. Rather than making health insurance premiums tax deductible and then putting a tax on health insurance premiums it is simpler to just eliminate the tax deduction on those plans over a certain amount.  (This change would have the additional difference in that high income people would pay more.)

    It sounds a lot better to say that a tax deduction is being reduced than saying a new tax is being imposed.

    •  Yeah, simply limit the exemption (0+ / 0-)

      I'd like to limit it both in rate and in amount.

      Limit the rate of the exemption to 28%, and millionaires pay 7% on the full value.

      Limit the amount of the exemption and you get something that in revenue terms is very similar to the excise tax. Except, since you're getting that 7% on the full value from millionaires, you can use that revenue to offset losses from raising the threshold higher than the original proposal.

      In America, 60% of bankruptcies are because of medical bills, and 80% of those people had health insurance

      by sullivanst on Fri Jan 15, 2010 at 09:24:34 AM PST

      [ Parent ]

  •  This is their last hurrah (1+ / 0-)
    Recommended by:
    Sunspots

    Their last attempt to make this POS bill work. Its going to fail, because it doesn't address the premium hikes at all.

    We'll end up with single payer. Soon.

    We really don't have any other choice, or the Dems are sure losers in 2010/2012

    Premium hikes for small businesses in Massachusetts were 20-45% this year. Keep that in mind with this excise tax!

    by Andiamo on Fri Jan 15, 2010 at 08:37:48 AM PST

  •  anybody hear the discussion on Fresh Air (0+ / 0-)

    this week re: excise tax and other things? Terri Gross interview the senior editor from New Republic who blogs on HCR. i was struck by how many issues that are hot buttons for DKOS all have meaningful cost savings in them, including the excise tax.

    this is a big frustration for me with the way the discussion takes shape on DKOS. there is always a POV of a fix that doesn't look as favorably on good ideas. that is the nature of politics. the challenge in reforming something as complex and big as our healthcare system will bring that out even more. but just because a fix may have some negatives attached from a certain POV, that doesn't mean its negative or motivated by bad intent. far too often on DKOS that is what people have taken from specific items, until it forms our own version of Convention Wisdom.

    i heard persuasive arguements in that discussion that high-end health plans mask costs of healthcare from users and contribute to its higher rate of inflation thant the rest of the economy.  i'm sure there is more to the story than they were able to cover, and other valid POVs. but, do we really need to speak of every item in HCR as THE THING that will destroy the reform effort, represents some sort of betrayal to a key constituent, or the thing that will kill the Democratic party.

  •  High Implicit Taxes on Low-Wage Workers (0+ / 0-)

    Kaiser Health News has an article on what the mandate alone would actually do to workers, at www.kaiserhealthnews.org/Columns/2010/January/011310Cannon.aspx .

    The mandate turns into a marginal tax rate, in some situations, over 100%, which creates disincentives for earning even $1 more in some conditions.  People will be worse off if they make more money.

    Take a look at the article.

    •  You're misinterpreting that (0+ / 0-)

      It's not the mandate that does that.

      It's the subsidies, and the way they vanish at 400% FPL.

      In America, 60% of bankruptcies are because of medical bills, and 80% of those people had health insurance

      by sullivanst on Fri Jan 15, 2010 at 09:28:25 AM PST

      [ Parent ]

      •  I was trying to point that out in a diary (1+ / 0-)
        Recommended by:
        Sunspots

        yesterday but I got so angry that I wasn't very articulate about it.

        PNHP also have an article about it.

        People say that the "in exchange" plans limit OOP costs but I cannot see how they could possibly do that for any significant number of people without going to Congress and the Senate looking for many times more money than they have, and I wasn't able to get the text of the whole bill to load on my browser.. (using a laptop that needs more memory, more than 2 gigs...)

        Also, the "high risk pool" that is supposed to cover people until 2014 has a almost laughable (or cryable) level of funding that works out to $3.90 per American per year.

        We have a big problem... they are fast talkers, with forked tongues..

        BAD, unaffordable healthcare and selling "hope" of fixing it is "the gift that keeps giving" to Dems vote wise.

        by Andiamo on Fri Jan 15, 2010 at 09:53:59 AM PST

        [ Parent ]

        •  These are NOT "good ideas" (0+ / 0-)

          they are the ravings of desperate madmen hell bent on preserving a system that should have been dumped ages ago.. a system that has literally killed (at this point) millions of people.

          BAD, unaffordable healthcare and selling "hope" of fixing it is "the gift that keeps giving" to Dems vote wise.

          by Andiamo on Fri Jan 15, 2010 at 09:56:45 AM PST

          [ Parent ]

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