Demystifying the "Cadillac" health plan
"Cadillac" or "gold-plated" insurance programs have come under fire in the Capitol Hill debate about health care. But just what do the plans cover and how do they work? Joel Rose reports.
Obama administration Senior Advisor David Axelrod after meeting with the House Democratic caucus at the U.S. Captiol in Washington, DC. Axelrod was on the Hill to talk to members of Congress who are facing several large pieces of legistation, including health-care reform, as they head into their summer recess. (Chip Somodevilla/Getty Images)
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TESS VIGELAND: We all knew we'd be spending a lot of time in the waiting room while politicians debate health-care reform. We knew it meant open-heart surgery for the entire health industry. Now, it seems, infection is starting to set in. All we can do is pace and wish that health reform was as successful as Cash-for-Clunkers.
Congress is getting ready to head home for August break with no clear deal on the table. So let's hear about one buzz phrase that came up this week. The idea is to tax so-called "Cadillac" or "gold-plated" benefit plans.
Joel Rose explains what those are.Joel Rose: The average family's health insurance policy costs $13,000 a year. Some plans cost twice, even three times that much. Those are the plans the White House is talking about taxing. Here's presidential adviser David Axelrod on CBS's Face the Nation.
Axelrod: This was an intriguing idea to put an excise tax on high-end health care policies, like the one the executives at Goldman Sachs have.
Goldman Sachs didn't return my calls, so I didn't get to ask exactly what a $40,000 a year health insurance plan covers. But Len Burman at the Tax Policy Center in Washington thinks he knows.
Len Burman: There's some plans for which almost everything is paid for. So you go to the doctor, you don't worry about what's prescribed or how much is being spent, because you're not responsible for any of it.
You're not responsible for the proposed taxes, either. They would be directed at insurers who offer premium plans, although insurance companies would probably just pass the costs back to the consumer. And a lot of those consumers aren't earning Goldman Sachs salaries. They're just paying high premiums, because they may have a pre-existing condition or because they are expensive to insure for other reasons.
Karen Pollitz studies the insurance industry at Georgetown University.
Karen Pollitz: Insurers will jack up the price of health insurance for somebody who is sick. We pay more based on age. But that doesn't make it a Cadillac. It just makes it an over-priced, I don't know, bicycle.
Unless there are cheaper plans on the market, Pollitz says the proposed tax might indirectly affect a lot of people with expensive but very average coverage.
I'm Joel Rose for Marketplace Money.
Comments
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From Merritt Island, FL, 09/22/2009
Cadillac health plans are just a product like anything else. You (or your employer) pay a higher price for higher service. That's how it works in any other business (e.g., coach vs. First Class airplane seats). If you are financially successful, you can afford to eat at a nicer restaurant than, say, I can (I'm down to a $1 McChicken for lunch now, if I don't have my PB&J).
This is free enterprise.
On to Cash for Clunkers. One study I read reports that we spent Billions on CfC, but the total gas savings based on the MPG criteria was only in the few hundreds of millions. Is that successful?
From Madisonville, KY, 09/07/2009
People want free health care. There is no such thing. We will pay for health care with insurance premiums, directly to the provider, or with higher taxes. When a rich company is taxed, we pay higher prices for their products or services. "There is no such thing as a free lunch."
08/05/2009
"Cadillac" should not be defined in terms of the price or premium charged for the plan, but to the "value" of the benefits provided. It is possible to calculate a value for any plan assuming it is based on a standard population, so that the differences don't reflect geographic variations or perceived illness "risk" of any given person. Plans that provide extraordinary benefits that do not encourage the patient to carefully monitor his/her own care might reasonably be taxed in this manner, without unduly penalizing those who have higher premiums due to these other factors. Oh, and this is what is meant by the "actuarial value" of a plan.
From Fallbrook, CA, 08/03/2009
When it comes to health insurance, a lot of us are paying Cadillac prices for Hyundai healthcare. Like us. Couple, self-employed, 63 and 62 years old, no problems, don't even take any medicine, we grow most of our own organic fruits and veggies! We have been paying $18,500 per year for health insurance with a typical $40 co-pay, no vision or dental. We just got the new rates for the next year - a 14% increase - about $21,000/yr.
Last year, my wife broke her arm and needed surgery and a titanium implant - which cost us about $9,000 more than our health insurance covered.
In fact, last year we paid about $4000 more in healthcare costs than income taxes!
We don't need no @#$%^&*() cadillac, we need a city bus for everybody to ride on!!!
From Fargo, ND, 08/02/2009
More insurance isn't the solution. Affordable health care is. Health care, without insurance, has gone up in price faster than the rise in insurance costs.
Health care needs to be affordable as well as health insurance.
Think about it this way: What is a person's quality of life if he or she has to go into bankruptcy to cover what the insurance company didn't. Too many Americans have had to go that route. Why then even have insurance.
The whole problem with insurance in general is that it is a shell game that we all pay into, hoping we never have to play.
From Long Beach, CA, 08/02/2009
Health Care & Health Insurance reforn are not synonomous! We all want health care reform, but what we are getting instead, is only health-insurance 'reform' in a bill written by the parties that will benefit the most, and not even read by our representatives! Insurance is the problem, it is NOT the solution.
I'm a Centrist Republican, but I believe every single American should have full, complete, top notch, unrestricted, FREE health care. Model it after the VA's health services in Long Beach California (the BEST medical care in the world!)-contrart to Hannity and Beck's misinformed claims about VA care.
We already pay for public health care (County systems; Medi-Care, Medi-caid,Medi-Cal, etc.). Lets have HONEST discussion of what it would take to provide OPTIMAL care for all Americans-not 'minimal' or basic insurance company discretionary care. Most of the physical infrastructure already exists. It merely needs to be expanded and modernized.
Whether you are Democrat, Republican OR Independent, lets isnist the 'debate' be refocused on actual deliverable health CARE rather than ambiguous, undefined insurance schemes that ONLY benefit insurers. I(f anyone does NOT want the public care I propose; fine! Keep your isnurance for private care costs above the public care I propose. Just dont give me spurious arguements that the Government is incapable of providing good care, because I owe my life to the excellent care I get as a Veteran. If I had been enrolled in VA Health Care when I had my heart atttack, I wouldn't have had to file bankruptcy.
08/01/2009
Because of a previous heart attack, my husband's policy costs $25,000 a year for the two of us. It's not any more comprehensive than an ordinary plan, just more expensive. And yes, we pay it ourselves because he is self employed. Thank goodness it's even available through a trade association. So will we be penalized for having a "Cadillac" plan? Congress should look past cost to make a determination.
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