There are a number of things I dislike about the senate bill. I find pretty much everything but subsidies and increasing poverty limit percentiles to be a finely wrapped tragedy waiting to happen.

However, let’s talk about the excise tax. I’m personally going to be impacted ( if current projections on costs are accurate between my premium and my companies percentage match my plan is already rubbing up on the 2014 cap because I live in a high cost area ). There are going to be many like me who will be in that same bucket here in California. You could consider that full disclosure, however I also believe that it will help make my argument as I go along.

See, I work in IT. I’ve worked at quite a number of companies over the years, it’s the new nature of business since the death of pensions. Benefits have been fairly uniform in cost/coverage from company to company. For the past 10 years, I’ve had me and my son covered with only a 1 month lapse in coverage for me ( though not for him ) due to unemployment. I’m lucky, and I know it.

I have, over the years noted a trend that has accelerated in the last 4 years. My premium payment has increased and the company payment has decreased. It’s pretty standard in the run-up to Q4 to get the announcement that this is another year the company is tightening their belt and essentially passed the proverbial buck to the employees. Most are now offering the latest flavors of ‘health care savings accounts’ or bare bones coverage plans in order to sweeten the bitter pill and in the cases where people don’t need to use them, they really are wonderful pacifiers.

I’ve also noted my co-pays steadily increasing to something like double what they were 4 years ago. I’ve had a pretty uniform policy cap of 1 million ( it’s for the life of the policy, but practically speaking it’s an annual cap ), so that at least has remained pretty constant. Otherwise, I’ve seen more of my dollars going to health care and I don’t use it other than the usual preventative check ups and the odd case of throat infection etc.

So in terms of pre-reform health care, my trajectory has been somewhat steep. Sure I could bend my own cost curve, but I’d be cutting holes in my son’s safety net which I’m not willing to do ( and I have to have the same plan he does, so I can’t even mix and match ).

The key takeaway here is, the employers I have worked for and that my friends work for are essentially at their upper limit for health care costs. Instead of eating the costs and being non-competitive in base salary, companies have done the math and are offering competitive salaries and passing the health care spend onto employees.

This is why the excise tax bothers me. The provider is going to pass those costs onto my company. My company is going to either pass them all on to me, or remove the ‘adequate coverage’ plans from being offered in order to not kill employee morale ( and save them money ). How do I know? Experience tells me so. I’m not guessing, postulating or what have you. I’m going to either have an additional 1200 ( this is a VERY conservative estimate* ) in annual premium payments or I’m going to have to choose a plan that exposes me to significant liability in the event of life happening.

*Estimate arrived at through SWAG, however, if my premiums go up 2 grand in 4 years that would actually be a nice change…so of that, the additional 400 in tax 200 of which is passed back to me, about 1000 of the additional premium is also passed back to me. Please note, all my estimating assumes that my company continues to keep it’s premium payment percentage the same which has not been the case year over year.

Aside from the personal cost, I’m not really seeing how this is going to ‘bend the cost curve’. Here’s another case where experience tells me that insurers will continue current pricing practices. Why? Because they don’t have to change. They’re already decreasing what the ‘adequate coverage’ plans cover while increasing premiums, I fail to see why they’d stop that particular trend. They’ll continue to offer their favorite money-makers ( the plans that don’t pay out due to less coverage ) while making the ‘adequate coverage’ plans cost prohibitive (now with the assistance of an excise tax ). I’m pretty sure the profit margin on the ‘adequate coverage’ plans are pretty slim, and will only get slimmer as the pool of people using it shrink to the more high risk people. So there’s no incentive for them to keep them priced low to avoid the excise tax when they can use it to ‘organically’ move people to the more profitable plans.

Then there is the all to realistic chance that fewer companies will offer insurance that even remotely resembles the ‘adequate coverage’ plans. At some point, their percentage match is just not going to make sense to them anymore. and I’m guessing that’s going to be some time in 2014.

So in summary, I think the excise tax blows. It will not change pricing on plans. It will decrease coverage provided by employer plans further. It will burden mostly lower to upper middle class Americans with more health care costs. It is the most backwards thinking approach to paying for subsidies that I’ve seen ( no one’s floated the idea of a surtax on middle class incomes only, which would be only slightly more backwards in that it would drop the facade the excise tax provides ).

For the economists in the room, i’d just like to point out, I’m not one. I’m going by what I have seen play out in reality. I’d love to hear how I’m wrong, mind you. It would help me sleep at night.

~fin