A Good Idea at the Time
Published in The Journal Record
October 21, 2015
“It seemed like a good idea at the time.”
This common refrain is used by each of us all too often when a decision which seemed appropriate and logical at the time turns out to have bad consequences. The phenomenon exists in all kinds of activities from picking a movie that turns out far worse than the previews suggested, to failing to take our raincoat to work because the morning skies were clear. It also extends to momentous decisions which later prove to be calamitous, such as invading Iraq.
While there is significant debate around the logic and necessity for the Affordable Care Act, there is unquestionably one feature that sounded much better at the time it was enacted than it does today. That feature is euphemistically called the “Cadillac Tax.” The thinking is there is a direct relationship between the richness of our employer-based health plans and the cost of health care. Because of this connection drafters of the ACA included a provision requiring (starting in 2018) implementation of an excise tax on the portion of health premiums that exceed certain threshold levels. The theory is the tax will act as a disincentive for employers providing or unions demanding rich health plans that encourage the overuse of health care services.
Since the tax is indexed to a rise in general inflation, while health premiums increase much quicker, an increasing number of health plans will be affected. As a result, employers will be under substantial pressure to reduce the cost of their plans. We can expect to see cost saving measures, such as very high deductibles, become commonplace. Attractive features, such as health savings accounts, might also be eliminated. Another disturbing feature is that the threshold is a nationwide number, which means employers in high cost areas, such as New York or San Francisco, would face the tax in larger proportions than employers in low cost areas. The experts believe if the law remains unchanged over 25% of all employers will be immediately impacted. Because of the indexing feature that number will rise rapidly.
It’s no wonder those on the political left who fought for and celebrated the ACA are beginning to wonder if “it sounded like a good idea at the time” applies here.