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Bringing down the ‘Cadillac’ health plan

Marketplace Staff Dec 14, 2009

Bringing down the ‘Cadillac’ health plan

Marketplace Staff Dec 14, 2009


Steve Chiotakis: Congress continues to debate health care reform. And one of the proposals on the table to help pay for it is this tax on expensive health insurance plans. They’re called “Cadillac” plans because of how much they cost. And not necessarily what that cost buys you. Sponsors say it could bring insurance costs down, but not all Cadillacs are equipped alike.

Fortune Magazine’s Allan Sloan is with us now. Good morning, Allan.

Allan Sloan: Good morning, Steve!

Chiotakis: So if we’re talking about taxing on premiums and not necessarily what you get from those premiums, I mean who’s that serving?

Sloan: Well it’s serving a political point, because the senators who proposed it can say that they’re taxing only the rich and miraculously pay for the health care plan. That’s the stated reason, and it also drives down costs. In reality, I think it’s a question of just pretending that only the rich will be affected, and they haven’t really thought it through.

Chiotakis: Do you think this is going to give enough of a disincentive to stop people from buying into these really expensive plans?

Sloan: No, because you’re not gonna have a choice. A calculation I did shows that if the 100 United States senators were in fact their own plan, because their average age is something like 63 or 64, they’d pay a tax like the end of the world — but because they’re part of the federal work force, they’re not subject to the tax because the work force is much younger than the senators. There are all of these unanticipated consequences where the people you would think would get whacked won’t get whacked. And maybe some eight-person company that’s had a problem because some individual had an expensive disease and next year the premiums go up — a lot of people who don’t have anything you would consider lush could end up being hurt by this thing because of the way it’s drawn.

Chiotakis: If the end game, Allan, is to bring cost and drive premiums down, how do we get there?

Sloan: Well if I knew that, you could be sure I’d be a consultant and so rich I wouldn’t tell you. But I think you have to look at the system a whole different way than it’s being looked at. You have to say, “Gee, what’s wrong?” And part of the problem is that doctors are scared to death of malpractice and order a whole lot of tests you probably don’t need. You need really a system with someone who’s in charge of someone’s health and can make intelligent decisions, and the idea being to get people better, not to gain the system. Now, I suspect that will happen sometime after there is peace on Earth and good will to men.

Chiotakis: Haha, well, we can only keep our fingers crossed, right?

Sloan: Right.

Chiotakis: Fortune Magazine’s Allan Sloan with us today. Allan, thanks.

Sloan: You’re welcome, Steve.

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