Benefit excise tax could pose problems

Ever since it became known that Chrysler was spending more on health care benefits than the steel in its cars, efforts to reform the system have periodically crystallized in Washington.

Few have come closer to being enacted than the plan currently backed by President Obama, a modified version of changed approved by the Senate last December. At this writing, it appeared quite possible the Democratic majority in Congress might win approval for the plan through the side-door process of legislative reconciliation sometime in April.

While much of the debate this year has centered on lightening-rod issues such as funding for abortion and the degree of government control over an industry the size of health care, other provisions of the bill carry even more direct implications for Michigan workers and the employers who provide benefits.

Among the most potentially troubling is a 40% excise tax on expenditures for employer-sponsored health benefits above a set threshold, starting in 2018. The limits are set at $10,200 for individual coverage and $27,500 for family coverage. These thresholds easily exceed the national average premium costs of $5,000 for singles and $13,200 for a family. However, total plan expenditures would be defined to include employer contributions for vision, dental and other ancillary benefits, as well as funding for flexible spending accounts and health savings accounts.

If an excise tax is approved, it could force employers to choose between passing the cost along to employees, or cutting benefits. Estimates of how many employer-sponsored plans would be subject to the tax vary from 13% to 18% currently. However, at current rates of inflation it is estimated that one-third to one-half of all plans would face an excise tax unless rates are further adjusted by 2018.

Ironically, the excise tax was first presented as a means of controlling expenditures on so-called "Cadillac" health plans for the rich. Now, however, it appears it could hit the people who built the Cadillacs -- autoworkers enjoying collectively bargained benefit plans -- as well as many middle income workers in Michigan and across the nation.