With The Deal Struck On "Cadillac Tax," Small Business, Like The Cheese, Stands Alone

You may have read it here first. As predicted, Congress and the Obama Administration have sought to blunt organized labor's opposition to the proposed 40% excise tax on "Cadillac" health plans by exempting health plans under negotiated labor agreements from the tax until 2018...five years after it's to take effect for everybody else.

And yet, the tax won't fall on everybody else.

The Senate version of the health insurance reform bill already exempts large employer health plans (which are usually self-insured) from any of the bill's reform requirements.

It's a blanket exemption, from plan design requirements, taxes...pretty much everything.

So, labor union plans get a pass. Large employer plans get a pass. So who's left?

Small businesses, that's who...

I wrote a couple weeks ago about how easily a health plan with even a large deductible ($1,500 for one person, $3,000 per family) can cost like a Cadillac plan, even if it doesn't look or feel like one. Because small businesses are generally denied the benefit of the laws of large numbers, they pay 18-20 percent more for their health insurance coverage than big companies do. So based on price alone, and with Congress jacked up to generate revenue, small business is once again the pigeon at the poker table.

Small business groups have won the amazing victory of exempting vision and dental plans from the Cadillac Tax computation. But the tax is still looming quite large.

Media accounts suggest that the tax will be on insurance companies, not on individuals or businesses, which is factually true but practically fatuous; the same outlets suggest that taxpayers seeking to avoid the tax would undoubtedly face either higher premiums or reduced benefits.

But the "reduced benefits" part is an illusion, too, since both House and Senate bills would cap deductibles at $2,000 for one person and $4,000 per family per year.

Of course, all this may be just so much speculation if the Republican candidate wins the special election to replace Massachusetts Senator Ted Kennedy.

But for now, estimates are that exempting labor union health plans will reduce the impact of the Cadillac Tax from $150 billion to $97 billion over ten years. Which means that, in addition to paying higher insurance premiums to insurance companies, small businesses have been set up to pay an additional $97 billion in taxes.

Remember when health care reform was about reducing the pace of runaway health care inflation, and making coverage more affordable for small businesses?

Seems like a lonnng time ago...