This op-ed from Allan Sloan, editor of Fortune is a few weeks old, but still timely, and instructive and why the Cadillac tax is really a Chevy tax.
The problem is that they define "Cadillac" not by the benefits a plan delivers but by how much a plan costs. But as any insurance maven will tell you, costs depend more on the people being covered (old, sick, or both?) and location (high-cost New York or low-cost Montana?) than on the level of benefits. "High-cost plans aren't necessarily generous plans," says Beth Umland, director of research for health and benefits for the Mercer consulting firm.
Indeed. Here's an example. Let's say that the 100 members of the U.S. Senate (average age: 63), where the excise tax idea originated, had their own health plan rather than being part of the Federal Employees Health Benefits Program (average policy-holder age: 46).
The federal plan's Blue Cross option with vision and dental care will cost $6,971 for individuals and $16,124 for families in 2010, well below the threshold ($8,500 and $23,000) at which the excise tax, which starts in 2013, would apply.
This same plan just for senators would probably cost about $14,000 for individuals and $32,000 for families -- way, way up in excise tax land. My estimate is based on the work of economist Henry J. Aaron, who has analyzed the way people's ages affect health-care costs. See? A Malibu policy for a big pool of employees becomes an Escalade if it covers only older ones.
It's a simple and effective demonstration of how poorly targeted an instrument the excise tax as in the current Senate bill is, one that should hit home on that grayer side of Capitol Hill.