On Jan. 1, 2016, state employees who still have jobs — the ones who survive budget cuts and the ones who aren’t caught supporting peer-reviewed science — will begin the year with a pay cut.
Of course, it isn’t called a pay cut. It’s called increasing employees’ out-of-pocket health care costs. But additional co-pays and deductibles mean less money for employees — it is a pay cut.
Republicans and the out-of-state consultants they hired say these adjustments are being made so the state can avoid the Affordable Care Act’s “Cadillac tax” on premium health care plans.
The “Cadillac tax” is a hefty 40% excise tax on every dollar spent on a health plan above a certain limit. The rationale is that the tax will help control healthcare costs by disincentivizing plans that cover costly tests and procedures. It is an idea that has been floated by economists in both parties.
I am no economist, so I won’t venture to say if the tax will ultimately help or hurt the health care system. What I can say is that it is being used as a scapegoat for irresponsible budgeting by those in control of Wisconsin’s finances.
This tax won’t even start until 2018. Democrats knew that it would be controversial when this bill was written in 2009 so they pushed it into the far future. Presumably the hope was that we would be so happy with our new flying cars that we would ignore cuts to our health care.
But these health care adjustments to avoid a 2018 tax are being introduced in a budget cycle that ends June 30, 2017. The Legislature could make these exact same changes in the next budget cycle two years from now and still make the Cadillac tax deadline. The state wouldn’t pay a dime of excise tax doing this in 2017 instead of 2015.
This tax is also incredibly unpopular. There is building bipartisan support in Congress to modify or eliminate the tax. It seems premature for Wisconsin lawmakers to make changes now. At least that would be the case if avoiding an excise penalty was the true primary goal of these changes.
Still, even if the tax were starting in 2016, it didn’t have to come at a net loss to employees. If lawmakers wanted to simply avoid paying the admittedly excessive excise tax, they also could have raised employee base pay to roughly make up for the new health care costs. That’s what a lot of companies are doing.Goldman Sachs forecasts that employee wages will rise over the next few years to make up for the benefit instabilities created by the Affordable Care Act.
State employees here are going to be lucky if they get a 1% raise one of two years in the biennium. That doesn’t even cover inflation, much less these increased health care costs.
Blaming Obamacare is a smokescreen.
The major reason these changes are happening now is because Gov. Scott Walker and the Legislature need to scrounge around for some quick cash to salvage their bad budget. The additional $85 million that public employees will soon pay is going to plug holes in a terrible budget built upon irresponsible tax cuts and poor planning. That $5 property tax relief is going to cost the folks at the GEF buildings somewhere around $1,000.
Most of the families hit by these increased costs live in Dane County, and this will also have an impact on non-public employees throughout the county. Here’s another $1,000 or so they won’t have to spend in the local economy. For a party that is so adamantly against income redistribution, Republicans are quite happy to slow economic growth in Dane County, the only significant economic bright spot in the entire state.
If public employees have to tighten their belts again, Republicans could at least be honest about the reason behind it.