Now, according to a fresh study by City University of New York, published in Medical Press on Friday, a provision of Obamacare that will impose a hefty tax on costlier (“Cadillac”) benefit packages for the so-called rich which in reality hit middle-income families hardest.
When the Democratic Party was selling Obamacare in 2010, it claimed the long-standing exemption of employment-based health benefits from taxes was itself a regressive tax subsidy that favored the rich. A hefty Obamacare tax (beginning in 2020) against more expensive insurance benefit packages dubbed “Cadillac” policies was supposed to balance the haves and have-nots of health insurance.
Flash forward to 2016 and healthcare experts say the Cadillac tax is a disaster. “It’s shameful that economists have provided cover for this tax that will hit middle-class families and largely spare the wealthy,” said Dr. Steffie Woolhandler, professor of health policy and management at the City University of New York School of Public Health. Both employers’ and employees’ payments for such coverage are exempt from income and payroll taxes, an exemption that provided a tax subsidy of $326.2 billion in 2015, according to Woolhandler. The study conducted by Woolhandler and David U. Himmelstein maintains that as Obamacare removes those exemptions, healthcare costs for consumers and corporations that insure them will rise significantly. Republicans and labor leaders argued this would happen long before the Affordable Health Care Act was signed into law by Pres. Barack Obama.
The study’s authors flatly deny the “Cadillac tax” will make healthcare costs less “regressive” by imposing the new tax thereby forcing the so-called rich to pay their fair share. Instead, the study suggests that while the rich, as defined in the ACA provision, will pay more, it’s clear that middle income Americans “stand to sustain the greatest financial harm.” Consumers are caught in the middle as deductibles go through the roof along with deductibles making healthcare insurance policies unaffordable. Besides the financial burden, the unintended consequences like people not participating in uncovered preventive health care and skipping tests and doctors appointments they can no longer afford are real concerns.
The authors also warn of “the glaring unfairness of levying the Cadillac tax based on the “cost of benefits, rather than their richness”.
The study shows that employers seeking to avoid the tax will probably increase copayments and deductibles. The higher out-of-pocket costs would discourage most low-income families from seeking care – exacerbating inequalities in health and health care, according to the study.
While any notion that employers will reimburse employees for the cost of ACA’s “Cadillac tax” is not backed up in the research, the authors suggest that higher deductibles and out-of-pocket expenses would cost consumers significantly more for their healthcare even in cases where employers raised salaries to compensate for the new tax. Obamacare’s Cadillac tax provision was delayed for two years last year by the Obama administration after opposition mounted, but is now scheduled to become law on Jan. 1, 2020.
