Cadillac Insurance Tax and a House Divided

January 9, 2010

Now that both the Senate and House have passed two different health care reform bills in support of Obamacare, the two houses of congress must come together to craft one bill.  This is proving to be more difficult than the Democrats had thought with various special interest groups opposing different components of the two bills.

One sticking point is the so-called Cadillac insurance tax provision in the Senate health care reform bill.  The bill seeks to partially fund Obamacare by placing a 40% tax on health insurance plans that cost over $8,000 for an individual and $21,000 or $23,000 for a family (depending upon where you get your information).  This tax will hit many middle class families, which doesn’t seem to bother the Democrats as much as you would think. 

However, this Cadillac insurance tax will also hit many union members.  The major Unions are against this provision being in the final health care reform bill which is making several Democrats in the house nervous as Unions pour hundreds of millions of dollars to the Democratic party every year.

Previous version of the Senate health care reform bill had exclusions for some or all Unions leaving non-union middle class workers and others with generous health insurance plans holding the bag.

Ed Morrissey at Hot Air pointed out that there is another problem with the Cadillac insurance tax.  It seems that the Senate is counting on making hundreds of billions of dollars on the tax and not counting on the fact that many people will opt for cheaper plans as the excise tax will drive up the cost of insurance for many Americans.  This would further add to the deficit which is against one of Obama’s major goals for the legislation.

It will be interesting to see what happens over the next month as the Democrats race to get a health care reform bill to Obama’s desk prior to the State of the Union Address in February.

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