There is something fishy about the entire set of reporting of the Cadillac tax drove Harvard University to institute deductibles and co-pays for their employee health plan.
The numbers don’t add up.
Harvard University’s HR department has the full cost of health insurance at their website. Their most expensive policy for the year has a bi-weekly paycheck total cost of $261.23 for an individual or $707.08 per paycheck for family coverage. That works out to be $6,792 per year for a single person and $18,384 for family coverage. The employee has roughly an 18% to 20% payroll deduction, and the university pays everything else behind the scenes.
The Cadillac tax does not start until 2018. It applies a 40% excise tax on all premium dollars above $10,200 for single coverage or $27,500 for family coverage.
Harvard is not even close to meeting those thresholds. If we give a 5% growth rate to premiums, Harvard would breach those caps in 2023 if those caps were stable. However the threshold levels grow at inflation plus one percent for the first two years, and then the inflation rate. Using the same 5% growth rate, and a 2% inflation rate, Harvard does not breach the caps until 2026. Performing a sensitivity analysis and reducing the insurance premium growth rate to 4.5% pushes out the first excise tax dollar until 2029. Bumping inflation to 2.5% and growth rate to 5%, also pushes the first Cadillac tax payment until 2029. And remember, these dates are for the most expensive plans currently offered by Harvard. The cheaper plans would not run into Cadillac tax territory until well after my toddler son has finished pranking that other school in Cambridge.
How many businesses institute unpopular human resources changes solely to avoid taxes half a generation or more into the future versus seeing immediate reductions in current expenditures?
My bet is Harvard was looking to minimize its health insurance costs, decided to offer a very rich but slightly less rich benefit package, and blame Obamacare and hope no one of any importance or influence does the math. That’s what I would do if I was the Assistant Dean of Paperclips given the charge to reduce total compensation costs by X percent.
This seems to be the game plan of 90-95% of American businesses who offer health insurance: cut the bennies, raise the employee percentage, and blame Obama. Let the famed America innumeracy and racism do the heavy lifting.
I’d probably do it too, were I a sociopath with no conscience.
Considering the immense stupidity of the mass mind, betting on their inability to do math seems like a pretty good risk.
Hah-vahd boys don’t do math. That’s for the geeks at the technical trade school across the way.
The company I contract for blamed Obamacare when they switched to lower cost health insurance 2 years ago. I assume this is rampant.
Edit to add – Almost everybody in the office immediately started complaining about Obamacare never taking a moment to consider any other option.
I wonder how much of this is going on. I had someone tell me this morning his employer called them together for an “Obamacare meeting” where they were told they’re paying more out of pocket. They only make 15 an hour so he was pissed. He didn’t know enough to explain to me how that worked, specifically, why this was a result of Obamacare- it wasn’t “Cadillac tax” I don’t think- but I really do wonder how much bogus Obamacare-blaming is going on at these local employers.
It’d be really easy to call it “Obamacare” rather than “we’re shifting more health insurance costs to you”, which is what employers here had to admit pre-Obamacare.
The new plan for the faculty involves co-insurance. The fear among the rank and file is that Harvard is setting a precedent for the next round of union negotiations. The union fought off co-insurance in the last one.
That’s an incredibly shortsighted strategy at any university. Faculty love running models, particularly when they can show they are a victim of some bureaucratic decision.
@Eric S.: I’m really surprised there hasn’t been more Obamacare-blaming here at Penn State. They have really stuck it to us this year, and last year wasn’t good either.
Relying on the old “I was told there would be no math” dodge certainly works for most employers, but so does non-transparency in policy making.
You would think at Harvard with this level of transparency and some mathematical minds, there might be some blowback.
@Kay: That is my bet — anything bad on health insurance including continuation of trends since the late 90s is being blamed on Obamacare, while anything good (lower premiums, bigger network etc) is having the credit grabbed by HR and/or the Big Bosses fighting hard their employees.
@? Martin: But no one had done the math yet that I had seen…. it is an obscure little angle
After I started hearing about it I was thinking about it more broadly, too. That’s a really effective political tool for employers, that captive audience. If you think about people who are (maybe!) completely politically disinterested and also getting regular presentations exclusively from the employer’s perspective on the effect of regulations, federal laws, etc.
You start to wonder if this is why there are so many anti-worker workers :)
happened at my (former) university too. they made a couple of unpopular changes and blamed on obamacare, even though the reasons they cited didn’t have anything to do with it.
quite a few years previous, not that long after i started at the uni, there was a big change regarding the carrier and the plans, and the staff was in complete shock about the whole deal. i had come there from about ten years of working for very small tech shops where the plans changed every year and i could never name my primary care physician.
now i’ve started my own freelance business, in large part because of the security of being able to purchase insurance. that’s freedom to me.
It’s a Japanese company, manufacturing, and they’re considered “good” employers here, on the scale of “great to horrible”. They’re not union but they have full benefits so they are a cut above the bottom of the barrel. It just sounded hinky – they told them something about “80/20” and this person I spoke to interpreted that as “we now have to pay 20%” which he (now) believes is a result of Obamacare. I don’t think he had any real handle on what they told him. If he did he couldn’t explain it to me. They also told them about the employer mandate, that it was at 100+ employees but would go to 50+. Since they’ve always provided health insurance I’m not sure why they went into that.
That’s what my company did last year. There were meetings to explain the changes to our health insurance “because of Obamacare.” I’m sure this came down from the insurance company (UHC), but I don’t know if our HR people were dumb enough to accept it at face value and pass it along, or if they were trying to pass the buck themselves.
Basically, the big change was increased premiums and much increased deductibles (and particularly, separate deductibles for in-network and out-of-network, which basically ensured that any out-of-network coverage short of a catastrophe would not be covered at all.) This was blamed on Obamacare, which most people I know were smart enough to guess meant that the medical loss ratio restrictions meant they couldn’t make as much as they wanted, so they had to find a different way to avoid paying for stuff.
However, premiums actually went down for this year, for the first time in my working life! Thanks, Obama!
My employer did it, but more transparently. They’ve long been upfront (well pre-ACA) that healthcare costs were the reason we weren’t getting raises, and I’ve seen the budgets and they weren’t lying. When they shifted our plans around for this year they were relatively forthcoming about their motives. Part was the cost savings but part was to align the plans with what was being offered on the exchanges. My current plan is nearly identical to a platinum from the same provider – copays, etc. If I were to leave my job and need to buy from the exchange, there’s a plan there that wouldn’t be cheap or provide subsidies, but would be so similar that we wouldn’t need to change anything. One benefit to the institution is to make it easier for older (higher paid) employees to retire early and bridge to Medicare. Another benefit is that the providers can effectively combine us with the exchange risk pool.
We never blamed ACA, in fact we speak very highly of it, so it’s more of a dogfooding approach. There are some complaints but not that many. A platinum exchange plan is pretty damn nice, though it does cost us a bit more out of pocket but salaries increased to cover that, and the health benefits costs has finally stabilized.
Thanks so much, Richard. Excellent post, as always.
@Richard Mayhew: They will. They may not be public about it though. But at a university, someone is always doing the math.
A couple of years ago, a co-worker at the old day job told me that his brother was losing his job because the company was moving to Mexico. The reason given? The need to provide health insurance to employees aka “Obamacare.” Coworker hated Obama anyway, so there was no sense in telling him that Mexico’s labor costs were much lower than those of the US, and that was likely the reason the company was moving. Blaming Obama was just the icing on the cake.
This was in Wisconsin, btw. Hit enough working class folks with that sort of info in those circumstances, and that’s how R’s win elections.
“I’d probably do it too, were I a sociopath with no conscience.”
You’re not one? Shame – you will never rise to a position of prominence, influence, and renumerance unless you ARE a sociopath.
talk to your therapist about a program to lose your conscience and start to view your fellow humans as obstacles. You might still have time to climb the ladder, if you can catch the problem before it metastises into empathy and compassion.
It makes me mad because they’re really jamming here. They’re hiring and they’re all working tons of hours. I guess they’re planning on cutting back on benefits to make up for what might become some upward pressure on wages? It’s like whack a mole. It starts to look like employees might make out in one area and they just trim another.
I think Obamacare is becoming the blanket excuse for screwing over employees. A friend’s recent FB rant about how hard it is to get in to see the doctor nowadays morphed into all the things that are wrong with Obamacare.
The thing that tees her off the most is that allegedly Obamacare requires her to go see her primary care physician every six months to get a refill of her blood pressure medication, instead of her being able to call the office and have them fax a new scrip to the phrmcy.
Anybody know if this is an ACA requirement or is her doctor or insurance company setting up a new revenue stream?
This has been happening for years. Everyone I know’s HR department has done the blame Obamacare for reducing healthcare benefits while jacking the premiums. A month after Obamacare passed we had an outside speaker come in and give us the most laughable DOOM powerpoint on how the country’s businesses are in trouble thanks to Obamacare.
HR Block is now running ads pushing using their tax accountants instead of doing your own taxes because ACA is so confusing and has such tax implications.
Dagnabit. Even after edit it’s in moderation. Sorry.
I’m dreading that. Not looking at the rules or helping them when I can, but I’m dreading the freak out. I already looked at the list of “exemptions” and then “hardship exemptions” because I will hear outlandish things that make no sense and then there will be the slow and agonizing debunking, which won’t matter. because the initial report will become “true”.
@Kay: Once the idea that ‘shareholder value’ must be preserved above all else, workers were fucked.
From that point forward every company was going to do everything in their power to fuck over employees. They will always choose the most politically expedient excuse while fucking them over because turnover is bad, so they need an excuse, but regardless of the excuse, the company will continue to seek out ways to offshore, cut salaries, increase workload, cut benefits, and so on. I don’t know how after 35 years people still haven’t figured the game out.
mai naem mobile
Ugh, this is one reason I wished American school taught basic math in a different way. Not sure how, just any way that they have the basics down pat to the point that they can’t get bamboozled by politicians and salespeople. I’m not talking about algebra, just up to fractions and percentages and the concept of interest rates.
mai naem mobile
I hate to bring this up again, but was the Obama admin not expecting this and was there no PR pushing back on this?
Ain’t this about a muthaphucka.
Outgoing Postal Chief’s Advice: End Pensions, Overhaul Feds’ Health Care
By Eric Katz
January 6, 2015
Postmaster General Patrick Donahoe is ending his 39-year career at the U.S. Postal Service next month, and he has some advice for those he is leaving behind in the federal government: do away with pensions.
In a farewell speech reflecting on his career long service with USPS, the embattled Donahoe, who announced his retirement in November, said he hoped the cash-strapped Postal Service would serve as a breeding ground for initiatives that can later be expanded to all federal agencies.
“I would encourage Congress to view the Postal Service as a test bed or laboratory of change that might be applied to the rest of the federal government,” Donahoe said at his speech in Washington Tuesday. “When we look at the workforce we’ll need in 20 or 30 years, what we are doing today will have to evolve.”
@Redshift: Probably. Both UHC and our now-fired broker blamed the premium increases on Obamacare.
@rikyrah: FFS, the million postal carriers are going to be automated before 30 years.
Capitalism is a disease.
Tissue Thin Pseudonym
OT: I didn’t get the job I was really hoping for that it took them two months to get back to me on when they said it would be a week. They told me that their current staffing is sufficient, but I know someone working there and that pretty clearly isn’t the case.
I don’t know why I let myself get hopeful any more.
@? Martin: Kinda stunned to see that article in Forbes of all places.
@Tissue Thin Pseudonym:
I’m so sorry.
This is the same scam the University of Minnesota did. Cut back on benefits and blame it on the Cadillac tax…
@Rugosa: And co-insurance should be a deal-breaker in ANY health plan.
Co-insurance very nearly put me (with a chronic condition that turned deadly) in an early grave while I was in graduate school. Only a big donation from a well-off friend got my the surgery I needed to save my life.
Co-insurance was the *sole* factor that led me to choose an NIH postdoc (no co-insurance) vs. a University of Iowa postdoc (20% co-insurance).
People who suggests co-insurance, along with its close relative “putting skin in the game” can die in a fire. I’d go to the mat to stop it, at any cost.
@Tissue Thin Pseudonym: I’m really sorry too. From someone who’s had two “hopeful” interviews and is getting ready for a third in 2 years…I really feel for you.
@eldorado: University of Maryland had the audacity to blame a hiring freeze + furloughs and other unpleasant department-level budget shrinkage as the fault of the new medicare enrollmenst. You know, that thing that is FUNDED BY THE FEDS and not the state, so makes no sense whatsoever.
I’ve been on blood pressure meds for 5+ years and this has always been the case. It’s because the meds can effect your kidneys and they want your primary care doc to give you blood tests to see if you are suffering from side-effects.
Definitely not ACA related.
Megan Mcardle, an Ivy league grad herself, didn’t do the math. http://www.bloombergview.com/articles/2015-01-05/whining-harvard-professors-discover-obamacare
Sadly, any insurance plan that I can afford on my state exchange includes co-insurance.
In fact, I think they all do, but can’t confirm that right now.
@Greg: That’s what I thought. Maybe her doc was just letting her slide before. Or maybe now he’s gotten EHR compliant and makes sure she comes in for her bloodwork.
It’s all part of a move to do away with employer based health insurance.
As a corollary to your statement, also a move to make the consumer bear all costs, or at least as much of that as possible.
@Linnaeus: Thing is, a lot of state exchanges fairly strictly limit the maximum cost-sharing they’re allowed to charge per year. That limit was much higher on my grad student junk insurance plan, and for prescription drugs *there was no cost sharing limit* – and all coverage stopped at $1500 in drugs per year.
If you’re making just above the Medicaid limits, too, you’re eligible for further subsidies.
Co-insurance in the exchanges is actually nerfed somewhat compared to co-insurance in employer plans.
But all that being said? The people who suggest co-insurance can STILL DIAF, and that includes the people that didn’t just outright ban it when writing the ACA. Banning it and making all plans co-insurance free was talked about, but like so many other good features, it was tossed from the final bill.
@blueskies: ‘zactly. ;-)
@Kylroy: Most publications are not quite as partisan as we assume them to be.
Oh the Cadillac tax doesn’t kick in for a few more years, eh? Not shocking. We switched to HSA last year, “due to the Cadillac tax”, and even without any major illness we burnt through our + employer contribution.
True, it could certainly be worse. I went for two years without any health care insurance at all.
@Linnaeus: I would point out that an end to employer based coverage wouldn’t be the end of the world. I’d always seen the creation of the exchanges as a way to have a (at least semi-)functional system that can pick up the pieces as employer-based coverage gradually dissolves.
I agree. In fact, I’d be perfectly fine with an end to employer based insurance coverage if there is a sufficient (or even better) replacement. My concern is that we won’t really get that, either because we don’t find a way to improve on the PPACA or that the PPACA gets steadily undermined.
@Emily68: It might just become a hypothetical for her anyways….
@Linnaeus: Three here, prior to grad school. The medical condition that developed in that time ALSO almost killed me, and set the stage for many of my chronic problems going forward.
But hey, I didn’t die, so instead, I ended up costing some insurer far more money, so Kelly Scientific didn’t have to provide health insurance. Isn’t pass-the-buck fun?
@Linnaeus: PPACA as it stands strikes me as at least as good as we had it – exchanges ensure everybody can buy insurance, mandate ensures everybody *does* and that the market is viable.
Agreed, if PPACA gets weakened the dissolution of employer insurance could be a catastrophe.
I am glad you are here to shine the light.
Although the health insurance I’m buying on the exchange now (since neither of my employers provides any benefits at all) is worse than the insurance I had under the last employer I had who did provide it.
The fundamental political problem for Obamacare was always the insured, not the uninsured.
It goes back to people who have something not wanting to lose any of it, which is understandable. I think Democrats have to grapple with that reality, that economic insecurity isn’t limited to people who have nothing. It can also be about hanging on to what you have. If you have 15 dollars an hour and health insurance you’re not really in a position to give anything away. One of the side effects of economic insecurity is people become risk averse. If you’re right on the edge, Obamacare just looks like more risk that you can’t afford to take.
@rikyrah: Does he propose starting with his pension?
Only slightly OT but the House has passed the first ‘fix’ to Obamacare – the provision to raise the hours for the employer mandate to 40 hours. While not a surprise, they got 12 democratic votes for the proposal. What can you do when ‘your team’ keeps playing for the other side. (sigh).
Yeah, I expect for Dems to get hammered for this once the mandate kicks in. We suck at messaging and as 2014 shows us, elected Dems have no problems running away from their accomplishments.
On a more positive note, at least the GOP is pushing the 40 hour change for ACA as a standalone bill. Obama will have no issues vetoing that bill. What I worry about is when they include that provision in the draconian budget bill they will be passing this year some time. That is going to be a lot harder for Obama to veto.
@Original Lee: Her doctor is just taking good care of her by having her come in every 6 months to renew blood pressure medications. Is her BP under good control? are there any side effects that would require change to a different medication? are any long-term consequences of hypertension showing up, such as heart or kidney problems?
I know someone who works at Microsoft. They did the same thing last year, and he showed up saying it was because of the Cadillac tax provisions. Several of us pointed out to him that he was being misled, not least because the tax didn’t take effect for a couple of years, but he wouldn’t be budged from what he wanted to believe.
Just as well. She’d have done it wrong anyway.
@CONGRATULATIONS!: “racism” … if Hillary Clinton was President, I guess it would be “sexism.” If Romney, maybe “anti-Mormonism.” If [fill in blank] it would be [fill in blank].