Health Reform's Chevy Tax

October 28, 2009

The Senate health care legislation announced by Sen. Harry Reid on Monday will include a public option, but would pay for reform by taxing more costly, so-called "Cadillac" plans. Washington Post columnist Harold Meyerson says the proposed excise tax is going to hit an awful lot of Chevy plans, too: the congressional Joint Committee on Taxation says the tax will hit one-third of Americans by 2019.

Supporters of the Senate plan say employers will buy less-expensive plans to avoid having to pay the excise tax, meaning employees will need to pay more health care costs themselves — but that's okay since the money being saved on the cheaper plans will be passed on in higher wages.

Meyerson sees a different outcome:

[I]f employers opt for cheaper policies to avoid the excise taxes on more-expensive plans, their savings may not be passed on to workers as higher wages but simply kept by the employers. Out-of-pocket health costs for workers would rise, but into-pocket wage increases to cover those costs might not be forthcoming.

Read the full column at washingtonpost.com.