Why This Progressive Is Sticking By the Tax on Insurance Companies

A lot of the arguments against an excise tax on insurance companies come from those who want to kill health care reform. But a lot of them also come from friends who share my convictions about health care.
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There've been a lot of claims made and exaggerations leveled in the last days about a provision in the Senate-passed health reform bill that places an excise tax on the insurance companies that offer high cost health insurance plans. A lot of it comes from the right wing that wants to kill health care reform. But a lot of it also comes from friends who share my convictions about health care.

I want to address what they're seeing, hearing, and saying.

First, striking this provision from the final bill will make it much more difficult to pass final health reform legislation in the Senate and that's a huge mistake when we're closer than ever to completing a journey that began with Harry Truman. If passing health care reform was easy, it would've happened decades ago. It's not. It requires tough choices. And it's worth it.

Second, this is an idea that will help health reform succeed in the long run. It will create competition and place sunshine on the process of pricing health insurance premiums.

Third, it will help control future health care costs without -- I repeat without -- directly taxing employees. Unlike a cap on the existing tax exclusion of health insurance benefits, which I oppose, this provision will not require employees to include a portion of their employer provided benefits as part of their taxable wages.

Fourth, the excise tax included in the Senate-passed health care bill will affect only a small portion of the very highest cost health plans -- a total of 3% of premiums in 2013. The vast majority of health plans fall below the thresholds set in the Senate plan and would be completely unaffected by the provision. In addition, the Senate plan provides special protections to plans held by workers in high-risk professions -- like police and firefighters -- as well as by those over 55.

Fifth, for the small sub-set of plans that are affected, the likely impact will be to increase workers' wages. MIT economist Jon Gruber recently found that the excise tax included in the Senate bill would lead employers to raise wages by $223 billion between 2010 and 2019. In 2019, wages for those affected by the provision will be higher by about $660 per household. I repeat -- raise wages. After spending years and years hearing from workers tired of seeing their unions forced to spend all of their energy at the bargaining table just to hold on to health care instead of negotiating for better wages, we now have a way to help increase wages and improve health care simultaneously.

Look, make no mistake, I didn't cook this idea up because I think it's the best or the only way to improve health care -- but it's a good idea that also helps get health care passed. And if there's one thing Ted Kennedy taught us all, it's that in legislating on core issues, you seize those moments and marry the practical and the policy.

Does the Senate-passed bill cast too broad a net by setting the excise tax threshold too low? Yes. This could affect some of the hardest working American families. So let's fix it, not nix it. I believe the final health care reform bill will include appropriate adjustments to preserve its cost containing benefits while increasing the fairness of this provision. But let's get back to the business of doing that instead of fighting to kill a provision that improves health care -- and improves the chances of passing health care this month.

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