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Shopping for a car? Your health insurance may be a Cadillac.

The House and the Senate are behind closed doors hammering out health care reform. President Obama had indicated that he would like to see the final bill on his desk before the State of the Union address, most likely January 26th. There are still differences, however, between the two bills that must be ironed out. Although the legislation may not make that deadline, it will need to be completed soon after, as the focus will then turn to the 2010 midterm elections. Given the announced retirement of some key Democratic senators, and the possible defeat of others, it may be even more difficult to gather the 60 votes necessary to pass the legislation. The House all faces some midterm election challenges in 2010.

What appears to be a consensus among the House, the Senate and President Obama is the tax on so-called “Cadillac” plans that is a part of the Senate bill. While it would seem that these plans are only for the wealthy, there are many who are not wealthy that would be impacted by this tax. Put simply, Cadillac plans are high premium plans that cost more that $8500 for an individual, and $23,000 for a family. The definition of “premium” is not limited to health insurance premiums; it also includes dental benefits and both employer AND employee contributions to HSAs and FSAs. Some of these plans include employer contributions as well and affect those who are not among the very wealthy.

The majority of health insurance is purchased at the workplace. Many industries may be considered health risks. Other businesses have a population of older employees or live in an area where health care costs are high. While the employees themselves may not be highly compensated, the employer component of health care may place them in a high premium plan. There are also individuals who buy health insurance on their own that could feel the impact of this tax.

It’s important to note that although the tax is technically not levied on individuals, the effects may be far more significant. To absorb these taxes, employers who “self insure”, that is pay for their employees health bills themselves, would be required to pay this tax. Undoubtedly this will force them to reevaluate their healthcare plans to avoid the surtax . In addition, insurers will certainly reduce payments for services, increase copayments, and eliminate coverage for some procedures entirely.

As an employer, you will need to take a hard look at your health insurance and see what a “Cadillac” tax will do to your plans and to your employees. As an individual, you may find yourself with less coverage.

For additional information contact EAB HealthWorks.