CWA Presents 18 Studies Outlining Negative Effects of Excise Tax

New compendium of government & private sector reports proves excise tax on health plans does not bend the cost curve, impacts the middle class, and will reduce benefits

Communications Workers of America (CWA) supports methods for funding reform included in House bill, including modest surtax on wealthiest Americans

The Communications Workers of America (CWA) today presented a compendium of eighteen reports from both government and private sector organizations that debunk key arguments made by proponents of the tax. The reports show that the Senate tax on health care plans will affect more than just "Cadillac" plans, result in substantial benefit cuts and increased cost sharing to the middle class, and not bend the health care cost curve.

"These numerous reports make clear that a tax on health care plans is the opposite of reform – it will hit middle-class families and working Americans hard," said Larry Cohen, President of the Communications Workers of America. "The health plan excise tax will not let families keep the good health plans they have now."

The compendium was released as the Senate nears passage of its version of the health care bill, which contains the so-called "Cadillac tax" as a mechanism for funding reform. The House bill contains alternative methods for paying for reform including taxing the wealthiest Americans. The differences in the two bills will need to be reconciled.

Specifically, the reports show:

• The excise tax will affect large numbers of health plans that reach deep into the middle class.
• High-cost plans typically are not due to "excessive" benefits. They are largely due to demographic factors in the workforce – age, gender, chronic conditions, and type of industry – and local pricing and practice patterns.
• The excise tax will not let many workers keep the good health plan they have now. To avoid the tax, affected health plans will significantly reduce benefits and increase cost-sharing (deductibles and co-pays) in order to get premiums below the thresholds at which the tax applies. These cuts will be dramatically larger in the second decade as the difference between health plan inflation and the rate at which the thresholds increase grows exponentially.
• The excise tax will destabilize the employer-based system resulting in plan terminations, higher costs to workers, and a shift to lower-cost high deductible health plans with limited benefits.
• There is no evidence that the excise tax "bends the cost curve" – reducing the underlying rate of growth and inflation in the health care system. There will be some modest reduction in health care costs to employer plans and to overall health expenditures – not because the excise tax bends the cost curve but largely because it reduces the amount of health care for which people are covered.
• The excise tax will not bend the cost curve because it does not address the fundamental cost-drivers in our health care delivery system so that care becomes less expensive and is delivered more cost effectively.
• Higher cost sharing will lead to lower utilization and foregoing needed care, which will result in worse health outcomes and increased health disparities.
• Lower utilization has done little to reduce costs in the United States. We are already near the bottom in hospital and physician usage, but our health costs are 50 percent more than the next highest spending country.
• The excise tax is a large tax increase on middle class Americans, and it is a regressive tax increase, especially when compared with the surcharge on wealthy individuals proposed in the House of Representative's legislation.
• Most employers will not increase workers' wages in exchange for cutting health benefits, contrary to assumptions made by the Congressional Budget Office (CBO).

CWA supports the alternative methods for funding reform included in the House health care bill. They include levying a modest 5.4 percent surtax on the wealthiest Americans – individuals earning more than $500,000 a year or families earning more than $1,000,000 a year – or 0.3 percent of U.S. taxpayers, which would raise $460 billion over ten years, and requiring most employers to provide coverage or pay a penalty of 8 percent of payroll if they do not, which would raise $135 billion over ten years, according to CBO.

The compendium of the reports is available here: http://www.healthcarevoices.org/excisetaxcompendium.