Monday, August 24, 2009

Health Reform's $10 billion Subsidy for Employers & Unions

The Detroit News reported on a health reform provision:

The bill, approved by a House committee late last month, includes Section 164, a reinsurance program for retirees, according to a summary of the bill from House Speaker Nancy Pelosi's office. It sets aside $10 billion to establish a temporary reinsurance program to provide reimbursement to participating employment-based plans for part of the cost of providing health benefits to retirees age 55-64 and their families. A Senate version has nearly identical language.

This $10 billion subsidy goes to employer or union programs, i.e. it helps people that already have insurance.

Employment-based plans must apply to participate and be approved, and the health care plan would reimburse participating employment-based plans for 80 percent of the cost of benefits in excess of $15,000 and under $90,000. The plans are required to use the funds to lower costs borne directly by participants and beneficiaries.

The government would 80% insure the employee and their family for care between $15,000 and $90,000. The employer or union would provide 20% of the coverage. Why the giveaway to those currently providing coverage? Corporations and unions provide huge campaign donations. Corporations want to dump that pesky health insurance benefit, while unions want to pick it up.

The provision would benefit a "wide range of retiree health care plans, including those sponsored by large private-sector employers, by state and local governments, and by VEBAs (union) ," according to Bloomberg News, which reported the provision Friday.

I thought health care reform was to cover the uninsured and bend the cost curve. This subsidy is another federal giveaway, benefiting the usual suspects. It fits with the Stimulus provision providing $25 billion in tax breaks to corporations buying back debt on the cheap.

(HT-Economic Policy Journal)

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