Thursday, January 14, 2010

In Which a Meme is Rejected [UPDATED]

When people refer to an item as the "Cadillac of [fill in the blank]," it's meant to praise that item as top-notch and feature-rich. There's an implied quality about something being the "Cadillac" of its ilk. Implicit also is the idea that the item in question is more expensive than its competitors, but well worth it.

It's become fashionable to refer to the excise tax on health insurance plans with premiums over a certain threshold as applying to "Cadillac plans." Again, implicit in this comparison is the idea that the plans in question are more expensive because they have richer benefits. We refer to those kinds of plans as "Phantom Insurance," but that's another post. The problem with the idea that the excise tax would apply only to these feature-rich plans is that it is (at best) misleading.

I have sitting on my desk, for example, the renewal for a small group with premiums that would now make the carrier subject to the proposed new tax. It has a $2,000 per person annual deductble, no office visit co-pays and no prescription drug card. It is a very simple configuration and, in conjunction with a company-sponsored HRA, works well. But some of the insureds in this particular group have significant and expensive health problems which result in a pretty high premium. None of them are lifestyle-related, so there's little that can be done to mitigate these costs. It is by no means a "Cadillac plan;" perhaps a Kia at best. Still, the renewal premium would automatically trigger the new tax.

I've chosen to call these kinds of plans "mandate-driven;" my reasoning is that a significant savings could be achieved simply by removing some of the special-interest-generated mandated benefits. But I'm a reasonable sort: what would you call them? After all, there are thousands, perhaps millions of small employers whose premiums will trigger the new tax, but whose benefits certainly aren't at a "Cadillac" level.


UPDATE - Overtaken by Events Edition: It's now being reported that the most appropriate term for these high-premium policies would be "Non-Union-Sponsored Health Plans."
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