Reader Question – What about my Cadillac Plan?

A reader writes:

I do like my cadillac insurance plan. It costs me just $150 a month but my employer plays the other $750. Under the 2 plans, I would be charged a tax of 35% for having that plan…

I also have read the 35% tax that we will pay for our insurance premiums if the total cost of the plan exceeds $750 (that’s my amount plus the amount my employer pays for me) for a single plan. Most of us with anything close to a decent policy now will be paying this additional luxury — oh yeah, “cadillac plan” — tax.

I am completely open to debate as to how we raise money for reform.  And I acknowledge that increasing access will raise costs.  Some people feel this should be done in a progressive way, that focuses on the more well-to-do.  The tax on “cadillac” plans is one way to do that, although not my preferred method.  Others feel they should be flat, and affect everyone the same percentage.  Debate.

However, this reader is wrong on a few things.  If I read his numbers correctly, then the total premiums on his plan are $900 a month.  If he is part of a family, then this isn’t a “cadillac” plan.  Remember, the average family plan in the United States is over $13,000 a year.  That’s the average!  A Cadillac plan would have to be much, much more expensive.

If, however, his is a plan for a single person, then his plan is very expensive at $10,800 a year.  It’s almost as much as my very generous family plan!  However, the “cadillac” tax is only on that money above the cap.  And the specifics of the Baucus bill say:

Under the Baucus plan, insurers selling a plan costing more than $8,000 for an individual and $21,000 for a family would have to pay a 35 percent excise tax on the excess amount.

So this reader would owe a total of $980 of “cadillac” tax right now.  I’m not saying that’s not money, but it’s not communism either.

UPDATE: Fixed my math!

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