The Atlantic takes Columbus Day off, so I am late to the game on the dueling analyses of future health care premiums. A PWC report commissioned by the health insurance industry says that premiums will skyrocket. Meanwhile, Jonathan Gruber of MIT says no, they'll plummet! Ezra Klein says it's hard to say who's right. I don't find it hard to say that both analyses have serious problems.
The liberal blogosphere has made much of the fact that the PriceWaterhouseCoopers report assumes that the excise tax is applied to plans, rather than estimating the change in behavior. This is a completely defensible choice, because there is no good way to figure out how much behavior is going to change. The CBO does the same thing when it refuses to score costs--or savings--it regards as sufficiently difficult to calculate. Unless you have a good data set on the corporate income elasticity of healthcare benefits, any number that you assign to this change in behavior are simply a wild assed guess.
But that's going to bias PWC's numbers upward, which they sort of forget to mention. How much? By much less than people may think just reading the complaints. This quote from PWC has been extensively highlighted:
We have estimated the potential impact of the tax on premiums. Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is applied.
Reading this, you might think that everyone is going to structure their benefits to get around this tax. But the CBO expects us to collect quite a bit of money from this tax. Interestingly, we have some insight into the thoughts of the CBO and Joint Committee on Taxation on the income elasticity, because the Baucus bill changed two things about the excise tax between proposal and final amendment: it increased the excise tax from 35% to 40%, and it eased the threshold for retirees and workers in high risk professions. The net change is less than $14 billion over the ten years. By 2019, the tax is still supposed to be collecting over $45 billion a year.