Attention Montana state employees:
If you think you are overpaid and your benefits are too high, ignore this message. On the other hand, if you feel your total compensation is perhaps a bit below market, but your healthcare benefits balances the equation – this one’s for you.
The current debate in Washington DC on the healthcare bills is now taking direct aim at you! President Obama has signaled he would prefer a tax on so-called “cadillac” health plans, rather than an increase on income taxes for “the rich”.
What this means to many Montanans, including all state workers, most local government employees, as well as every teacher in every school district, is that you will be hit with a 40% tax on your insurance plans.
As envisioned in the Senate bill, an excise tax of 40 percent would be imposed on the value of individual health plans over $8,500 annually and family coverage over $23,000. What’s less commonly known is that those dollar maximums include not just the premiums paid by employers and employees for medical insurance, but also for vision and dental coverage, as well as reimbursements from flexible spending accounts and health reimbursement arrangements, and employer contributions to health savings accounts.
If an individual were to withdraw $2,000 from a flexible spending account to help pay for medical care, for example, that amount would count toward the $8,500 ceiling.
Of course, the tax isn’t supposed to take effect until 2013. But take a look at your year-end pay stub and then figure that amount will increase by several percentage points between now and 2013 and then do a little simple math and see if you aren’t going to hit the magic threshold before the kick-in date.
The politicians are saying that the employers will pick-up the tab on this one, but just in case you’ve become a little jaded about politicians keeping their promises, and just in case you don’t have the extra $700 per month that this little tax could cost you, you might want to contact your senators and suggest that this isn’t the kind of healthcare reform you had in mind.
Just saying…
My wife has one of these Montana state employee health insurance plans. I have my own, through my private industry employer, with which I cover myself as well as our 2 kids. My wife’s plan (Big Blue) costs her almost twice as much for coverage as mine (United HealthCare) while mine has 3 individuals covered compared to her 1. We realize the difference in cost is made up by my employer subsidizing my coverage at a higher rate than what the State does for her. We have no problem with that. What we have a problem with is the State’s refusal to let her opt out of her insurance plan and not be forced into paying for a policy that she then wouldn’t have. We could cover her under my plan and save about $285/mo, but apparently Big Blue and the Montana State public employee union don’t think this is such a good idea. You would think the governor, is his cost saving push, would be able to recognize that shifting the State’s portion of the insurance cost that they presently subsidize over to private industry would add dollars to the budget…..yet I’ve never heard anything of this issue ever being mentioned. It makes me wonder, are Big Blue and the State government/union so much in bed with each other that the health insurance needs of Montana state employees and their families aren’t being used in an illicit scheme to enrich a select few people?
Now add the tax implication. Montana state employees pay more for an insurance plan that is valued at a comparable rate compared to what private industry provides. They (the State employee) will receive less take-home pay(because of higher insurance costs) and will now be taxed on a product that many of them don’t want in the first place. Net result….even less take-home pay.
My employer, on the other hand, will probably drop my insurance and pay a penalty because that will add money to his bottom line. Isn’t life wonderful…..
I’m one of the Montana school teachers who has continually been unable to get over a 1% raise because the district tells us the health insurance is our raise. Now we will be taxed on the insurance at an even higher rate than if we had just gotten the $ to begin with. BTW, when I write to my senator I am told we need this plan to help our fellow Montanans. Talk about not listening to your constituents!