AARP’s endorsement helped secure passage of President Barack Obama’s health care overhaul. Now the seniors’ lobby is telling its employees their insurance costs will rise partly as a result of the law.
In an e-mail to employees, AARP says health care premiums will increase by 8 percent to 13 percent next year because of rapidly rising medical costs.
And AARP adds that it’s changing copayments and deductibles to avoid a 40 percent tax on high-cost health plans that takes effect in 2018 under the law. Aerospace giant Boeing also has cited the tax in asking its workers to pay more. Shifting costs to employees lowers the value of a health care plan and acts like an escape hatch from the tax.
“Most plan co-pays and deductibles have been modified,” Jennifer Hodges, AARP’s director of compensation and benefits, wrote employees in an Oct. 25 e-mail. “Plan value changes were necessary not only from a cost management standpoint but also to ensure that AARP’s plans fall below the threshold for high-cost group plans under health care reform.”
Not that anyone could have predicted that.
Although the tax on so-called “Cadillac” health care plans doesn’t take effect for years, employers are already beginning to assess their potential exposure because it is hefty: at 40 percent of the value above $10,200 for individual coverage and $27,500 for a family plan. The tax is intended as a savings measure, to prod employers and workers into more cost-efficient plans.
Certner said AARP’s plans are currently under the threshold for the tax. “We intend to stay below those thresholds,” he said. “It’s not in anybody’s interest to move above those thresholds, not the employees’ nor the employer’s.”
Well of course they do. As would any business. This perfectly highlights the problem with all policy driven economy, in that it assumes that people will act them same regardless.
One of the most basic fundamentals in economics (yeah, I know, those pesky fundamentals. Things like scarcity, which, so we’re told, only exists in normal times, not depressions!!) is that people respond to incentives. As the benefits for one activity increase, people will do more of it. The opposite is true as well. If the cost of one activity rises, people will do less of it.
Or, as Homer Simpson likes to say, “DOH!!”.
This is exactly what the critics of obamacare said would happen.