Tell Them Not to Tax Teacher Health Plans

Post date: Dec 11, 2009 4:15:56 PM

One of the least known and little understood provisions of the health care reform bill currently before the Senate is an excise tax on high-cost health plans. This is a vital issue for Connecticut teachers. If a final health care reform bill passes with this tax, teachers across the state would likely be forced into health insurance plans that are inferior to the ones they currently have.

In the pending bill, employer-provided health plans that cost more than $23,000 for family coverage and $8500 for an individual will be subject to an excise tax of 40% on the amount of the plan that exceeds the threshold. High cost states like Connecticut will be have the thresholds increase by 20% in the first year. This would mean, for example, that the threshold for a family plan in Connecticut the first year would be $27,600 as opposed to $23,000. This initial advantage will decline to 10% in 2014 and 5% in 2015. The threshold for retirees would be $1350 above active employees for single coverage and $3000 for family coverage ($30,600 as opposed to $27,600).

The tax will be applied to health, dental, and vision benefits. Average contributions to flexible spending accounts, health savings accounts, and health retirement accounts will also come under the umbrella of the tax. All of these benefits will be added together to determine if an employer plan exceeds the threshold. In the proposed legislation, it doesn’t matter if you are paying a portion of your premium. The amount you pay will not be deducted from the total cost of the plan.

The proposed tax would go into effect on 2013. It’s so complicated that it’s hard for the average person to understand how he or she will be affected. An example will help to illustrate its effects. Consider a district of about 450 members currently paying almost $25,000 for combined health and dental premiums. If premiums were to go up an average of 7.5% per year, the cost of the tax between 2013 and 2019 would be $9,951,000, an average cumulative tax burden per person per year of over $3700.

Retirees are not immune from this tax either. Though the threshold is slightly higher for retirees, they too will be carried over it.

One thing no one is talking about is the fact that the excise tax will fall harder on those plans in which women predominate. Because claims utilization is higher among women than men, plans with a higher proportion of women tend to be more expensive than plans in which the genders are more balanced. About 70% of CEA’s teacher members are women and this is one of the factors contributing to the cost of school district health insurance plans. The excise tax would therefore have a disproportionate and therefore prejudicial effect on school district plans.

We need to let our Congressional representatives know that teachers in Connecticut are unalterably opposed to any excise tax in the health care reform bill. Connecticut Congressional Information attached