Cadillac insurance plan
Encyclopedia
A Cadillac plan is an informal term for any unusually expensive health insurance
plan, usually arising in discussions of medical-cost control measures in the United States. The term derives from the Cadillac
automobile, which has represented American luxury
since its introduction in 1902, and as a health care metaphor dates to the 1970s. The term gained popularity in the early 1990s during the debate over the Clinton health care plan of 1993, and was also widespread during debate over possible excise taxes on "Cadillac" plans during the health care reforms proposed during the Obama administration
.
Although neither bill uses the "Cadillac" term, the 2010 Patient Protection and Affordable Care Act
, as amended by the Health Care and Education Reconciliation Act of 2010
, imposes an excise tax on plans with an annual cost exceeding $10,200 for individuals or $27,500 for a family (not including vision and dental benefits).
This excise tax will be 40% of the premiums which exceed $10,200 for individuals or $27,500 for a family.
Criticisms of these plans generally center around the fact that small or nonexistent co-pays, deductibles, or caps encourage the overuse of medical care, driving the cost up for the uninsured or those on other plans, necessitating a Cadillac tax.
A study published in Health Affairs
in December 2009 found that high-cost health plans do not provide unusually rich benefits to enrollees. The researchers found that only 3.7% of the variation in the cost of family coverage in employer-sponsored health plans is attributable to differences in the actuarial value of benefits. Only 6.1% of the variation is attributable to the combination of benefit design and plan type (e.g., PPO, HMO, etc.). The employer's industry and regional variations in health care costs explain part of the variation, but most is unexplained. The researchers conclude "…that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors—industry and cost of medical inputs—are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities."
Health insurance
Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is...
plan, usually arising in discussions of medical-cost control measures in the United States. The term derives from the Cadillac
Cadillac
Cadillac is an American luxury vehicle marque owned by General Motors . Cadillac vehicles are sold in over 50 countries and territories, but mostly in North America. Cadillac is currently the second oldest American automobile manufacturer behind fellow GM marque Buick and is among the oldest...
automobile, which has represented American luxury
Luxury good
Luxury goods are products and services that are not considered essential and associated with affluence.The concept of luxury has been present in various forms since the beginning of civilization. Its role was just as important in ancient western and eastern empires as it is in modern societies...
since its introduction in 1902, and as a health care metaphor dates to the 1970s. The term gained popularity in the early 1990s during the debate over the Clinton health care plan of 1993, and was also widespread during debate over possible excise taxes on "Cadillac" plans during the health care reforms proposed during the Obama administration
Health care reforms proposed during the Obama administration
This article is about specific types of system changes that have been proposed during the Obama administration to reform the U.S. health care system. It is not intended to cover specific legislative proposals, which often encompass multiple reform initiatives...
.
Although neither bill uses the "Cadillac" term, the 2010 Patient Protection and Affordable Care Act
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...
, as amended by the Health Care and Education Reconciliation Act of 2010
Health Care and Education Reconciliation Act of 2010
The Health Care and Education Reconciliation Act of 2010 is a law that was enacted by the 111th United States Congress, by means of the reconciliation process, in order to amend the Patient Protection and Affordable Care Act...
, imposes an excise tax on plans with an annual cost exceeding $10,200 for individuals or $27,500 for a family (not including vision and dental benefits).
This excise tax will be 40% of the premiums which exceed $10,200 for individuals or $27,500 for a family.
Criticisms of these plans generally center around the fact that small or nonexistent co-pays, deductibles, or caps encourage the overuse of medical care, driving the cost up for the uninsured or those on other plans, necessitating a Cadillac tax.
A study published in Health Affairs
Health Affairs
Health Affairs is a peer-reviewed healthcare journal established in 1981 by John K. Iglehart. It was described by The Washington Post as "the bible of health policy". Health Affairs is indexed and/or abstracted in PubMed, MEDLINE, EBSCO databases, ProQuest, LexisNexis, Current Contents/Health...
in December 2009 found that high-cost health plans do not provide unusually rich benefits to enrollees. The researchers found that only 3.7% of the variation in the cost of family coverage in employer-sponsored health plans is attributable to differences in the actuarial value of benefits. Only 6.1% of the variation is attributable to the combination of benefit design and plan type (e.g., PPO, HMO, etc.). The employer's industry and regional variations in health care costs explain part of the variation, but most is unexplained. The researchers conclude "…that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors—industry and cost of medical inputs—are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities."
External links
- Understanding the Health Care Excise Tax, The Bottom Line (Committee for a Responsible Federal Budget)
- Cost of the Finance Committee Health Care Bill