White House and Labor Leaders Agree on High-Cost Health Insurance Tax

Posted in Health Insurance

January 15th, 2010

On Thursday, White House officials were able to reach a tentative agreement with labor leaders on a tax for high-cost health insurance policies. The agreement is said to be one of the last major obstacles on the road to finally passing a comprehensive health care legislation.

What is the New Tax?

Under the new proposal, a 40 percent surtax would be charged for policies considered high cost. For family plans, this would mean those costs of more than $23,000 annually, and for individual policies, this would include costs of more than $8,500.

To get an idea of what this could mean to you, according to a survey conducted by the Kaiser Family Foundation, the average family policy in America last year cost $13,375, which means, this tax won’t affect many Americans.

Why Tax High-Cost Policies?

You may be wondering why officials are interested in taxing high-cost health insurance policies. Also known as Cadillac policies, the leaders are targeting higher-cost policies as a way to help pay for the expansion of health care costs to the uninsured, as well as cover the skyrocketing costs of health care.

People will not be directly taxed on these policies. Instead, the insurance companies will be taxed since they will be making the income from these high-cost policies. However, some union leaders believe that the costs could eventually trickle down to the workers. Also, there is a concern that it could deeply affect small businesses and older workers.

Do you feel that taxing high-cost health insurance policies is a good idea?