Report: Obamacare Tax Could Hike Cost of Ordinary Health Plans

Image: Report: Obamacare Tax Could Hike Cost of Ordinary Health Plans Dr. Martha Perez examines Maria Lebron in a room at Community Health of South Florida in Miami.

Thursday, 09 May 2013 11:00 AM

By Melanie Batley

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Expensive insurance plans with highly generous benefits are due to be taxed under Obamacare, but the tax could ultimately hit workers who simply pay high premiums for standard plans, according to a report released Wednesday.

The tax on premium insurance plans under the Affordable Care Act was meant to pressure employers and patients to choose lower cost, less generous plans, The Huffington Post reported.

But according to a study by the Economic Policy Institute, a tax on the cost of premiums, as opposed to coverage levels, could ultimately hurt individuals and companies who for whatever reason have to pay higher premiums for standard health insurance plans.

"[The tax] was sold as being on 'Cadillac Coverage.' The idea was that there were some people out there who are getting thousands and thousands of dollars worth [of] health insurance premiums," said the report's author, Elise Gould, director of health policy research at the institute.

Editor’s Note: New 'Obamacare Survival Guide' Reveals Dangers Ahead for Your Healthcare

"But the reality is that health insurance premiums can be expensive for many different reasons, not just because they have generous coverage."

The tax, due to take effect in 2018, will hit employer-sponsored plans valued at over $10,200 for an individual and $27,500 for a family. Employers will pay 40 percent on any amount above those limits.

Though the tax was also intended to incentivize companies to pay less for health insurance and instead offer compensation to employees in other ways, such as wage increases, the report argues that employees might still lose out in overall compensation if they're forced to pay for health benefits outside of their plans.

"It was sold as a way to tax quote-unquote Cadillac plans, and it's not a particularly well-designed tool to do that," Gould said, according to The Huffington Post.

"What you're doing is, you're putting people into less comprehensive health plans. The burden winds up being borne [by] those people who actually need to consume healthcare."

Editor’s Note: New 'Obamacare Survival Guide' Reveals Dangers Ahead for Your Healthcare

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