Taxing "Cadillac" Health Plans

"To pay for the 10-year, $856 billion bill Baucus wants to tax high-value insurance plans, those worth $21,000 for a family and $8,000 for an individual. Baucus says those are "Cadillac plans" enjoyed by a small minority of Americans. Aides said about 10 percent of plans and 8 percent of taxpayers could be affected."

"The high-value insurance plan tax, which Obama embraced in his speech to Congress last week, is a major source of revenue for Baucus' bill, bringing in an estimated $215 billion over 10 years.
If it's changed, Baucus would have to raise revenue elsewhere, which is not easy. Baucus and other supporters of the measure, including Sen. Kent Conrad, D-N.D., say it would have the positive effect of driving down health care costs over the long term by encouraging companies to move toward cheaper health plans and workers to use less care."

I just love how politicians view groups who have luxuries as pigeons to be plucked. They also think the pigeons will just stand there and take it. The only reason these "Cadillac" plans exist at all is because they are not currently taxed! Slap a 35% tax on them, and most of these plans will evaporate overnight, along with much of the presumed tax revenue. Kent Conrad essentially admits as much by suggesting that it will "encourage companies to move toward cheaper health plans..." and there goes the revenue he covets! Also, there is no "positive effect of driving down health care costs" here. Sure, the employees whose plans are sliced back may consume less healthcare, but that will have no impact on healthcare costs for anyone else, because healthcare simply does not operate within a normal free market state of supply/demand tension.

"The 35 percent tax levied on insurance plans is a different approach, though unions and employers contend it will end up being passed along to workers. Conrad acknowledged the criticism but said it was a necessary step."

So why are unions upset? Turns out that a bunch of their members have these "Cadillac" policies! No big surprise there.