America needs health insurance reform, and we need it now. But we do not need the kind of reform that the Senate is currently debating, which would shift massive costs onto many middle-class workers who have insurance through their employers. The problem is a sneaky excise tax, ostensibly levied on insurance companies, which would be passed directly on to employees and employers in the form of higher premiums.
The excise tax would be levied against insurance companies on premiums exceeding a certain threshold, which begins as low as $8,500 for single coverage and is slated to rise much more slowly than the average increase in the cost of insurance. In effect, it means that while initially it may affect only a small number of middle-income families, within just a year or two, it will begin to capture many more insurance policies.
One projection, based on the average cost of family insurance coverage provided through the School Employees' Health Benefits Program, shows that the excise tax is likely to kick in by year two. By year ten, based on projected growth in the cost of insurance, the tax could well exceed $10,000 on a family premium. That cost will certainly pass from the insurance company to the employer who pays the premium. Employers will attempt to shift the burden to employees. The end result: higher costs for middle class families.
Even worse, the quality of insurance coverage will almost certainly decline. To minimize or avoid the impact of the excise tax, employers and employees will be forced to consider reduced benefits, again leaving families more vulnerable to unexpected — and potentially uncovered — medical costs. Ultimately, the excise tax would trigger a race to the bottom, raising costs, lowering quality and putting a greater burden on middle-class families who can ill afford it.
There is a better way. The House of Representatives has passed health care reform legislation that accomplishes essentially the same reform objectives as the Senate version without passing the bill on to middle-class workers. Instead, the House bill finances this critical reform with a modest surcharge on individuals whose adjusted gross income is over $500,000, or couples earning over $1 million.
Both bills greatly expand coverage. Both contain provisions to benefit low-income families and senior citizens. Both ultimately reduce the federal deficit. But the House bill is paid for by asking the super-wealthy to step up and contribute their fair share. The Senate bill, as currently written, tries to sneak another tax onto middle-class families.
During his campaign last year, President Obama promised that individual taxpayers earning less than $250,000 per year would not see their taxes increase during his administration. He took the additional bold step of telling wealthy Americans that they might be asked to contribute a little more. The House bill keeps that promise. The Senate bill violates the spirit, if not the letter, of the president's pledge.
It is time for our senators to decide whose interests they represent: the super-wealthy, who will benefit from the Senate's taxing scheme, or the middle-class families who are counting on them for real health care reform.
ALSO BY BARBARA KESHISHIAN