- Jun 6, 2007
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There has been a lot of public discontent over the Senate Health Care bills plan to tax cadillac healthcare plans. Advocates for the middle class say that some middle class families are covered by such plans and that this tax will be passed on to them in higher premiums and reaffirming such scenarios are some rocket scientist insurance company executives who have publicly explicitly said insurance companies will do this to some degree. These cadillac plans are plans that offer very generous benefits - no or low copays and coinsurance, they cover elective surgeries, etc..
Congress can quickly put the kibosh on this problem quite easily by adding certain provisions in the bill. What these errant insurance company executives are saying essentially is we are going to get our profit figure off these cadillac plans and not be deterred by this tax because we will just pass on the tax to the plan purchasers in higher premiums. What the government needs to do essentially in the bill to solve this problem is restrict the insurance companies to charging in the premium amount the cost of claims on the plans plus their planned profit margin any premiums obtained in excess of this sum has to be returned to the plan purchasers in the form of rebates. This is not an excessive burden being placed on insurance companies by such provisions because the Health Care bills that are working their way through Congress will mandate on insurance companies that they comply with a prescribed medical loss ratio standards which means that insurance companies will have to spend a certain percentage of the premiums they collect on medical claims for the insurance plans they offer or give the shortfall back to plan purchasers in the form of rebates. To determine the appropriate profit margin to allow insurance companies to utilize in the above calculation, the government could allow the insurance company to calculate the average profit margin on all the cadillac plans the company sold over the last three or five years or the company could require all major insurance companies to turn over these profit statistics on cadillac plans they sold over the last three or five years and the government could compute an average industry profit margin and the government could mandate this profit margin be the maximum margin allowed in the calculations.
Congress needs to wake the hell up on another aspect of this revenue raising plan. The premium threshold for cadillac plans is something like $8000 for individual and $21,000 for family and this threshold is raised in accord with some inflation index like the consumer price index. The criticism in the media is deafening that this threshold will quickly lose its accuracy because health care costs in recent history rise higher than ordinary inflation, Congress will be faced with an Alternative Minimum Tax scenario on a yearly basis with all the accompanying fighting to lift the cadillac price threshold so it isnt capturing noncadillac plans. Congress should make the inflation index on this cadillac threshold an inflation index specifically restricted to yearly increases in health care costs throughout the nation.
Congress can quickly put the kibosh on this problem quite easily by adding certain provisions in the bill. What these errant insurance company executives are saying essentially is we are going to get our profit figure off these cadillac plans and not be deterred by this tax because we will just pass on the tax to the plan purchasers in higher premiums. What the government needs to do essentially in the bill to solve this problem is restrict the insurance companies to charging in the premium amount the cost of claims on the plans plus their planned profit margin any premiums obtained in excess of this sum has to be returned to the plan purchasers in the form of rebates. This is not an excessive burden being placed on insurance companies by such provisions because the Health Care bills that are working their way through Congress will mandate on insurance companies that they comply with a prescribed medical loss ratio standards which means that insurance companies will have to spend a certain percentage of the premiums they collect on medical claims for the insurance plans they offer or give the shortfall back to plan purchasers in the form of rebates. To determine the appropriate profit margin to allow insurance companies to utilize in the above calculation, the government could allow the insurance company to calculate the average profit margin on all the cadillac plans the company sold over the last three or five years or the company could require all major insurance companies to turn over these profit statistics on cadillac plans they sold over the last three or five years and the government could compute an average industry profit margin and the government could mandate this profit margin be the maximum margin allowed in the calculations.
Congress needs to wake the hell up on another aspect of this revenue raising plan. The premium threshold for cadillac plans is something like $8000 for individual and $21,000 for family and this threshold is raised in accord with some inflation index like the consumer price index. The criticism in the media is deafening that this threshold will quickly lose its accuracy because health care costs in recent history rise higher than ordinary inflation, Congress will be faced with an Alternative Minimum Tax scenario on a yearly basis with all the accompanying fighting to lift the cadillac price threshold so it isnt capturing noncadillac plans. Congress should make the inflation index on this cadillac threshold an inflation index specifically restricted to yearly increases in health care costs throughout the nation.
