I just received a notice last week from my health insurance provider that rates at my office would be increasing an average of more than 25%. It’s not unexpected. Apparently, health insurance is one of the few industries which can regularly raise their prices by double digits each year without retribution.

But what is unexpected is that the increase is creeping us slowly towards what the Senate Finance Bill is calling a Cadillac plan. My bare bones little plan (no dental, no vision) now costs about $5,000 per year for individuals and $15,000 for families. And I happen to have one of the latter.

The Senate Finance Committee had proposed a 40% tax on the portion of insurance which exceeds $8,000 per year for individuals and $21,000 per year for families. If we get similar increases in our health care plans for the next two years, I’ll be extremely close to being at risk. God forbid we add dental (and I have three kids with crooked-y teethed parents so there’s no dispute that this will likely be a necessity at this point). Who knew that I had a Cadillac plan?

Notwithstanding public options and other controversial parts of the health care reform bill, the real issue that remains of concern to many is how the plan is going to be paid for… In addition to the 40% tax on those Cadillac plans proposed by the Senate, the bill as recently passed by the House would impose a 5.4% income tax on individuals making more than $500,000 and joint filers making more than $1 million. If existing tax cuts expire in 2011, which appears increasingly likely, the top income tax rate would grow to 45% – a 10% increase.

But here’s a thought. In an increasingly dim economy, isn’t it a little scary to rely on higher taxes from top wage earners to foot the bill?

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Author

Kelly Erb is a tax attorney and tax writer.

Comments

  1. There will be no end to the increasing cost of Health insurance as long as the cost of goods and services increase…until hospitals, medical clinics and the like are not run as businesses for profit, the likelihood of Health Insurance cost containment is an incredulous notion.
    In this day, what is considered “affordable” is very subjective.
    I’m not sure what the answer is, however, basing things on the track record of any gov’t agency…when can you remember one that is run smoothly, efficiently, without cost overruns?
    Scary times, I’m afraid…

  2. A 10% tax increase on those making over a million? It’s a good start. That income bracket is the only one that’s seen any noticeable income gains in the last 20 years. So, yeah, relying on them for financing stuff sounds like a pretty smart plan.

  3. At least there is some attempt at paying for things that Congress passes. Remember the prescription plan? Iraq war? Those did not have any method to pay for them except saddle them against the deficit for our grandchildren to pay. And on top of that – lets give the wealthy a tax cut!

  4. To be clear, I’m not a fan of tax cuts for the wealthy when other rates stay static. And I don’t believe in trickle down economics. But I do think it’s disturbing to expect those in the top brackets to bear the burden of additional expenditures – especially at a time when revenues are way down. Statistically, we’re not climbing out of this hole by increasing taxes. We need to spend less. And if health care is important enough to fund, then find something that’s less important to cut.
    *steps off soap box*

  5. Eddie Parsons Reply

    If you don’t make something profitable you don’t have incentive. The reason we came to have good healthcare was because it has been done so with profit. When States are only allowing 6 or 7 (variations on this of course) healthcare providers to provide instate healthcare services while there are 1600 approx. in the nations, then competition is removed and prices are set. When lawyers are allowed to sue for frivilous and excessive cases malpractice insurance goes skyhigh for our doctors and they then charge for excessive tests to cover themselves and sometimes as I know personally they end up leaving the practice altogether because they get fed up with all the regulations and aggrivations they are put through. Government healthcare will disappoint and will cost more than they are letting on. Healthcare will be rationed-that’s a given. Government will also control the most sacred thing in your life –your health! So now with a dumbed down America what will you do? Look back on why our nation became great or continue down this path of wanting to be babysat by it. You will not be happy with your babysitter!

  6. It is not disturbing to to expect those in the top brackets to bear the burden of additional expenditures, it is in fact appropriate. People who are earning extraordinary incomes (the average household income in the US in 2007 was just over $50,000 a year) are hogging the resources. A person earning an income of $500,000 a year is not more valuable than a person earning $40,000 a year.

    It is also important to keep in mind that often people earning very high incomes do so by abusing and manipulating others and often add nothing of value to society. Business owners continually pay as little as possible to their employees and try to squeeze as much work as possible out of them completely destroying their quality of life. Are you aware that in in your home state restaurant servers are paid only a little over $3 an hour? They must rely on the kindness of strangers to make their living while their employers get rich off their backs.

    What about financial trading? What value does that add to our society? What useful items does it produce? how does it improve anyone’s quality of life aside from those who continually manipulate financial markets? You are kidding yourself if you think that people who are making million (or even 1 million) are some how harder working or more deserving than the rest of us.

    So yes, expecting resource hoggers to return some of those resources is appropriate.

  7. Wayne Phillips Reply

    I too am concern about the health care plan that is making its way through a Congress that is broken. My pension provides for health care, but because I was ‘forcefully’ retired, I am stuck with what my former employer will offer. That plan has increased in premiums over the years, but the pension has never been adjusted. The forced retirement also penalized my with a 35% loss in pension, and a 35% increase over the premium I would have paid if allowed to work my full career.
    Several rotator cuff surgeries (four to be exact) my medical insurance is presently being rationed. As the hospital finance folks said of Aetna denial of payment for reasonable and customary charges, due to an error by the hospital billing group, “they do it because they can”. Too many of those episodes, and we will have lost everything even though my insurance premiums exceed $500/ month. So having medical insurance is not always the answer. It is better than the millions who do without. Just don’t use it. Sort of the Repubican version of medical insurance, pay the premium, but don’t us it.
    The bottom line, as a previous responder said, in the profit motivation. in this whole matter the insurance companies have been the quiet elephant in the room. only once did it make a noise. Too much noise and it brings attention to itself before the play is over, and changes might be made that are not in the medical insurance interest.

    I also agree with one responder about the worth of folks in our society. Folks making a million plus are no more valuable or work any harder than those of us who make America run.
    A sampling of health insurance executives pay and compensation:
    AETNA (who manages DuPont med plan for pensioners) in 2008 made $24,300,112;
    CIGNA (who manages DuPont med plans outside Delaware) made
    $12, 236, 740.

    Now look at the folks who run the local hospital operations.
    Jack Barto, president and CEO of New Hanover Regional Medical Center – the largest health provider in the area and Wilmington’s leading employer – is the highest-paid hospital administrator in the area with an annual salary of $560,000;
    Denise Mihal, CEO of the privately owned Brunswick Community Hospital, made $321,539 including benefits and deferred compensation during the 2007 tax year, according to the most recent filing with the Internal Revenue Service.

    Who is making the money? You can believe that the CEO’s of AETNA and CIGNA only expose the compensation of a good number of folks beneath them. Who knows how many layers exceed $500,000 in compensation.

    Most folks would agree the broken system is the insurance companies themselves. High premiums, continuing to increase, outlandish compensation, and denial of benefits for any conceived reason.

    Move the elephant to a new pen, cut his rations. Medical care should be a basic part of life in America. I rate that right below that no child should go to bed hungry in this country. America has lost its bearing on what is best for the country, as a whole, not the priviledge and rich, including a corrupt Congress.

  8. Eddie: To say, “If you don’t make something profitable you don’t have incentive”… Obviously, more $$ is always incentive for everyone, however, it shouldn’t apply in cases of basic needs…Yes, in instances where companies sell goods and services that are luxuries, that makes perfect sense…but tell me what choice you have when you’re in pain, in a hospital? Do you have the ability to choose between Doctors based on cost (“I’d like to see how much the different doctors charge per hour so I can pick an affordable one”) Can you decide which brand on drugs they administer you based on cost? Is it fair practice to charge you exorbitant amounts for incidentals simply because at those moments in time, you have no choice and the company must be profitable…

    Health Care Insurance raises in double digits EVERY YEAR, however, I think the margin of profit to the Health Care Insurance companies is grossly exaggerated…If I rememebr right, I read recently that their profits were only 6%…
    Why would they need to increase double digits each year? Because the cost of service is increasing at an incredible rate…

  9. Eddie Parsons Reply

    Do you heat your house–do you cook food–do you have car for transportation. Do you feel these are basic needs to keep alive. All these essentials are sold by those that make a profit. If they didn’t make a profit then you would find yourself like those who lived in the former Soviet Union that came crashing down in 1989. Your argument I’m sorry doesn’t hold water. If your health insurance company on average doesn’t make but 6% profit yet your health insurance is going up double digits then there must be another reason for the high increase would you say yet the current Administration blames it on the Health Insurance Industry. Is there need to address Healthcare Reform, well certainly but the answer certainly doesn’t lie in the takeover by our Government who robbed from the Social Security Trustfund, has allowed Medicare and Medicaid to be corrupted into bankruptcy, whose Postal runs debt to the point of 7 billion dollars this year despite continued increases for POSTAL SERVICE. Taxes are always passed down. No matter your income level you will have to pay for increased taxes even if it is on the rich. We all need to wake up to reality. We don’t live in the Utopia Obama tried to paint with his promise of HOPE & CHANGE.

  10. Eddie: Am I incorrect in thinking that the power and gas that goes to your home and the cost associated is still under some regulation? And didn’t the country’s dependence on oil spark the latest economic downturn when that oil shot up dramatically? And do you agree that oil companies should be making billions in profit every year providing a product that is necessary for our way of life? Seems to me that running those companies for profit has helped the wellbeing of this country!

    You say ” If your health insurance company on average doesn’t make but 6% profit yet your health insurance is going up double digits then there must be another reason for the high increase” Then what could be causing this? Greedy Health Insurance carriers? 6% hardly sounds greedy…
    My wife once spent some 90 minutes in care in emergency (after waiting 3 hours in the waiting room)…some minimal tests were done…the bill? $8000+ dollars…
    Good thing we had insurance and they were in network…now we only owe $1500…
    The bottom line…all parties involved in providing health care goods and services are businesses for profit. The problem…THERE IS NO COMPETITIVE BALANCE in the providing of the care…THERE IS COMPETITIVE BALANCE IN THE PROVIDING OF HEALTH INSURANCE and as a result, the costs have been kept in check to a certain degree…

  11. Eddie Parsons Reply

    Robert–you said the word “regulation” , that is different than the government taking over. Gas and electricity are privately owned enterprises. Yes oil prices went up and who do we buy most of our oil from?–foreign countries who care little for the US except the dollars it sends them. Far too long our government (both parties) have failed to institute an effective energy policy since the rationed gas of Jimmy Carter’s Admin. But the downturn really came when the subprime lending market came along. Irresponsible government policies promoting ownership of housing to people who could not pay their loans. And loans made by institutions that should not have made those loans although in all fairness the government was pressuring these institutions to do so (and this time without regulation because politicians Barney Frank and Chris Dodd being two prominent ones didn’t want the regulation on Freddie Mac and Fannie May).
    And yes there is another reason for why your insurance has gone to double digit increases. If you read my previous comment I mentioned two prominent ones. Also Robert bear in mine that illegal immigrants make use of the hospital emergency rooms without the ability to pay back. Our government has allowed ILLEGAL IMMIGRATION to flourish and has failed to curtail it although the American people have wanted it controlled and done LEGALLY. So when your wife went to the emergency room she had to wait 3 hours (perhaps because those who didn’t have insurance were ahead of her) and you had bills not only for your wife but also your insurance company had to pick up the losses the hospital incurred because people who don’t pay are part of the charge to your insurance company. Robert, let me say I think we need a good tuneup in healthcare reform. But a lot of the reasons that the politicians are telling us are causing the problems are smokescreens for the things they don’t want you to blame them for. They have an agenda and right now it is a Socialistic Agenda. For everything the government does for you or me we will be asked to give it back in the form of taxes and freedoms. America was born from the fact that those who came here came to escape the oppression and intrusiveness of Government, mostly Kings at that time, but this generation imagines itself to be enlightened and fails to have really learned the lessons of history.

  12. Eddie-in my first post, I stated “There will be no end to the increasing cost of Health insurance as long as the cost of goods and services increase…until hospitals, medical clinics and the like are not run as businesses for profit, the likelihood of Health Insurance cost containment is an incredulous notion.”

    I don’t think the current Health Care Legislation will do anything until the costs of the goods and services are contained…i.e. REGULATION…

    It’s like you’re arguing with me as if I am sayign the legislation will work…

    Do you have statistics regarding the illegal immigration claims you tout? I am curious how much of the pie we are talking about.

    Also, because the hospital was in my network, though the charge for service was $8000, the “negotiated rate for service” by my Health Insurance company was more like $5500 so the hospital had to eat $2500…that is not illegal immigrants causing the system to take a loss…but it IS the health care provider attempting at regulating costs…

    I will reiterate my stance with you…no legislation wil work until the “for profit” entities’ goods and services are controlled or regulated. There is not true “competition” (which you haev not addressed yet) of those goods and services, other than the Health Care Insurance companies trying to negotiate the cost of doing business within their Health Care provider networks…without competition, costs will continue to escalate…

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