How will Obama’s “Cadillac health plan tax” affect city of Chico?

1 Sep


I heard the term “Cadillac Plan” in reference to public and quasi-public pensions and healthcare plans a few years ago. These are “defined benefits” plans – as it was explained to me, this means, the pensioneer is guaranteed payment, no matter the economy. Meaning, we, the taxpayers, are on the hook for these benefits that we were never allowed any oversight in negotiating, no matter that our jobs are headed overseas, and our homes are threatened with foreclosure.

Let’s face it – we never would have agreed to pensions or healthcare benefits for which the employee pays little to nothing, and  we certainly would have chortled and guffawed at pensions of 70 – 90 percent, available at age 50-55. But we weren’t consulted. 

These contracts are still negotiated behind closed doors without public  oversight. They show us what they’re doing, between sessions,  but it’s not like we’re allowed to push some button and throw the whole thing out when it sounds crazy. And how would we know – have you seen the kind of double-talk these things are written in? 

Steady public pressure has made slow changes. “New hires,” meaning those newly hired employees who have never worked for any public agency, are now required to pay 50 percent of their own pension and benefits. The police department has taken in a couple of new recruits from the academy over the last few months, but Chico mostly hires people who are already in the stream, and they are allowed to go on paying 9 – 12 percent.

The police recently agreed to pay 12 percent, up from ZERO percent, only if they were given generous pay raises. Right now they are pushing for a “step system” with automatic salary increases, salary minimums, and “compaction” increases – whenever a subordinate’s salary comes within a certain distance of their supervisor’s salary, the super’s salary automatically increases. Salary increases raise their pension and benefits expenses – for employees who have been “in the system,”  over 30 percent of that expense is shouldered by the taxpayers, the rest still rides on a bucking bronc of a stock market. Cal Pers is demanding more be paid by the employer/employee every year. So far our “fiscally conservative“council majority is allowing the employee to ride pretty cheap, while the taxpayer is expected  to pay more to run along behind the truck. 

Or, in this case, the Cadillac Escalade. 

The other day I finally heard about the “Cadillac Plan Tax.” Wow, how did I miss this? I know, I usually am skeptical of taxes, but this one might just pass the mustard for me. It seems, health care plans worth more than $10,200 for an individual and more than about $27,000 for a family will be subject to a (sit down) 40 percent tax.

Am I hearing, tax the public workers?

That’s what the unions heard way back in 2010. They went to Obama, who gave them a reprieve til 2018. So, that’s why we’ve been hearing about it again – they’re reprieve is about to expire, and the unions are beating the drums to get it dumped. Here’s an interesting article on that, from 2010:

But, here’s the thing. It’s not a tax on public workers, it’s a tax on their employers. Oh, shit – that’s US! Here’s an article I found from about a year ago – the state of Vermont was predicting it would cost them $9 million a year.

And here’s Obama, trying to modify our behavior again:

But the tax also was viewed as a way to reduce the number of health plans that have little cost-sharing and premium contributions, which some argue contribute to the overuse of healthcare. President Barack Obama has been quoted as saying the excise tax will discourage “these really fancy plans that end up driving up costs.” Lavish executive-level health plans and collegiate benefit packages, like Harvard University’s, have been oft-cited targets.

But oh oh, he might have got his pants caught on his own pitchfork – 

“However, many collectively bargained policies fall into the Cadillac bracket as well.”

And here’s the truth – public employees pay less and get more than the taxpayers.

The Health Affairs study, published Monday, sought specifics about what kind of health benefit packages unions provide for employees. People with union plans have lesser out-of-pocket obligations and don’t pay as much per month toward their premium as others with employer-based insurance, but the surprise was “the magnitude of the differences for certain things,” said Jon Gabel, a healthcare fellow at NORC at the University of Chicago and one of the study’s authors.

For instance, families in collectively bargained plans paid about $828 per year toward their premium, or about $69 per month, according to the study’s surveyed data. That compared to $4,565 for the average employer-sponsored family plan, or about $380 per month, according to 2013 data from the Kaiser Family Foundation.

I don’t know if this pending doom scenario has caught on yet with our city council. The last time I looked, council members were getting packages in excess of $10,000. They choose the package they want, and only pay 2 percent of their salaries – the mayor only makes about $9,000, so he pays about $180 a year for a policy worth about $21,000.  Other councilors get similar policies but pay less because they make smaller salaries. Who wrote that? Will they pare packages down? Or will we pay more? 

I’ll try to keep an eye on this. 



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