Archive for category: MaxTax

Here’s a scary part of MaxTax, if I understand it correctly. MaxTax still screws employees but rewards Wal-Mart as I’ve laid out in this post and this post. Here’s the language in question:

As a general matter, if an employee is offered employer-provided health insurance coverage, the individual would be ineligible for a low income premium tax credit for health insurance purchased through a state exchange. An employee who is offered coverage that does not have an actuarial value of at least 65 percent or who is offered unaffordable coverage by their employer, however, can be eligible for the tax credit. Unaffordable is defined as 13 percent of the employee‘s income. For purposes of determining if coverage is unaffordable, salary reduction contributions would be treated as payments by the employer. The employee would seek an affordability waiver from the state exchange and would have to demonstrate family income and the premium of the lowest cost employer option offered to them. Employees would then present the waiver to the employer. The employer assessment would apply for any employee(s) receiving an affordability waiver. Within five years of implementation, the Secretary must conduct a study to determine if the definition of affordable could be lowered without significantly increasing costs or decreasing employer coverage.

A Medicaid-eligible individual can always choose to leave the employer‘s coverage and enroll in Medicaid. In this circumstance, the employer is not required to pay a fee.

But note how affordability is defined: 13% of "income."

Now look at how MaxTax defines "affordable" for individuals having to buy insurance via an exchange.

Exemptions from the excise tax will be made for individuals where the full premium of the lowest cost option available to them (net of subsidies and employer contribution, if any) exceeds ten percent of their AGI.

The individual definition of affordable uses 10% of Adjusted Gross Income. Whereas the employer’s definition of affordable uses 13% of (apparently) total income.

Now, it’s a good thing (sort of) that the affordability rate for individuals is 10% of AGI. That means a family would be able to opt out if there were no health care available at even a lower rate than I thought (for example, it might mean a middle class family could opt out if health insurance cost them $6,000 a year, as opposed to $8,000 a year). Read more →

Ezra has written a thoughtful follow-up to my complaint that discussions of the role of insurance company in writing our legislation neglect to discuss profit. I agree with parts of it and disagree with others. The most important point Ezra makes–which explains his focus on providers to the exclusion of insurance companies–is this passage:

The insurance industry is not a particularly profitable industry. To be more specific, they’re the 86th most profitable industry as measured by profit margins, with an average margin of 3.3 percent. That’s lower than drug manufacturers (16.5 percent), health information services (9.3 percent), home health care (8.4 percent), medical labs and research (8.2 percent), medical instruments and supplies (6.8 percent), biotech firms (6.7 percent), generic drug manufacturers (6.6 percent), and much else. That’s not to pretend that 3.3 percent is nothing, but it’s hard to see how that’s a primary driver of health-care spending, much less the growth in health-care spending. 

With that in mind, let’s take a step back to the question that started this series of posts–Matt Yglesias’ question, "how bad is that?" if the insurance industry writes our health care reform bill. With now several bills on the table along with the Max Tax framework and the President’s framework, how bad is it to let corporations necessarily motivated by profit maximization write the bill?

Short of our entire political system changing tomorrow such that single payer became feasible (which would make Ezra, Yglesias, and me all very happy), what we’re going to do instead is put tens of millions of people into the health insurance system who aren’t currently there. The question is, how to do it for the best outcome at lowest cost to taxpayers and individuals. Some of those people will be put into the system via Medicaid, though a great many will be put into the system directly via insurers. Importantly, those put into the system via insurance will be mandated to buy insurance. Some will be subsidized by the government, though others will not.

So the insurers will be getting tens of millions of new customers, and those new customers with financial constraints will be subsidized by the government but others will not.

Read more →