Jason Pye:
Jonathan Gruber’s comments about ObamaCare, revealed last year thanks to the efforts of Rich Weinstein, were rare moments of honesty about the 2010 health insurance law. The White House and administration officials, of course, tried to distance themselves from the MIT economist. Yet, in June, it was revealed by the Wall Street Journal that Gruber “worked more closely than previously known with the White House and top federal officials to shape the law.”
By bragging about deceitful way ObamaCare was drafted and, on several occasions, commenting on the “stupidity” of American voters, Gruber showed the elitist attitude of central planners. During his prepared testimony in December before the House Oversight and Government Reform Committee, Gruber said, “In some cases I made uninformed and glib comments about the political process behind health care reform. I am not an expert on politics and my tone implied that I was, which is wrong.”
Gruber’s explanation is really disingenuous. He may not be a politician or “expert on politics,” but he knew exactly how to pitch certain aspects of health care policy for inclusion in ObamaCare by concealing the intentions behind them to the public. He got caught, though well after the fact. His public mea culpamatters very little. ObamaCare’s “Cadillac tax,” for example, is one particular provision of the law that was purposefully misrepresented to Americans to sell the law.
The Cadillac tax is a 40 percent excise tax on health plans that cost $10,200 or more, or $27,500 for family coverage. The tax is aimed at purportedly high-end health insurance plans, hitting around 26 percent of employers, according to the Kaiser Family Foundation, when it takes effect in January 2018 if flexible spending accounts (FSAs) are included. In July, the Internal Revenue Service announced that it is seeking public comment through the end of October on a proposed rule for the tax.
Because the tax is chained to the Consumer Price Index, more employers will be affected. The Kaiser Family Foundation estimates that 42 percent of employers will have at least one plan meeting the Cadillac tax threshold by 2028, assuming premiums grow at a 5 percent annual rate. Professor Bradley Herring of the Johns Hopkins Bloomberg School of Public Health and Lisa Korin Lentz estimate that the tax will affect 16 percent of health plans in 2018 and roughly 75 percent of plans by 2028.
To put these figures into context, approximately 157 million Americans, including dependents, are on employer-sponsored health plans. In short, this could be a huge political headache for the next administration or its predecessors. Though the Cadillac tax has escaped much of the criticism that other provisions of the law have received, that could soon change.
If the Cadillac tax is going to hit so many employers and health plans, why was it included in ObamaCare? Well, the tax is based in a belief that tax breaks for employer-sponsored health insurance coverage are bad public policy. Gruber clearly laid this out during a March 2011 lecture at the Pioneer Institute.
“No economist would ever set up a health system with a tax subsidy on employer-provided health insurance. It’s a terrible policy. It turns out politically it’s really hard to get rid of. And the only way we could get rid of it was first by mislabeling it, calling it a tax on insurance plans rather than a tax on people, and we all know it’s really a tax on people who hold those insurance plans,” Gruber told the audience. “And the second way was to start it late — start it in 2018. But, by starting it late, we were able to tie the cap for the Cadillac tax to the [Consumer Price Index], not medical inflation.”
“What that means is the tax, which starts by taxing only 8 percent of the insurance plans, essentially amounts over the next 20 years basically getting rid of the exclusion for employer-provided health insurance. This was the only political way we were ever going to take on what is one of the worst public policies in America,” he added. (Emphasis added.)