Full Measure | Obamacare: Cadillac Tax

It was an investment advisor from Philadelphia who stumbled onto one of the biggest stories about the Affordable Care Act to date. His name is Rich Weinstein and he helped expose a startling set of videos that changed how many Americans view Obamacare. Though publicly available, these remarkable videos have only been rarely seen, getting just a few hundred clicks. On them, a key Obamacare adviser admits they intentionally misled voters, whom he called stupid. Weinstein tells Full Measure how he dug up the videos as a citizen journalist and warns of more trouble ahead.

Rich Weinstein: Back in 2013, I was a victim of ‘if you like your plan, you can keep your plan’. So late in 2013, we got the email notice from the insurance company saying that our plan was no longer ACA compliant. I had believed at that point that I wouldn’t lose my plan based on what the administration, everybody was saying about the Affordable Care Act. At that point, I kind of decided to get involved and figure out what really was going on.

So Weinstein got on the Internet and started digging. What he found was a group of Obamacare advisers referred to as “architects”.

Weinstein: I started noticing more in the news that these people called ‘architects’ were out there basically trying to influence public opinion. And I figured these architect people were, they were mostly academics, and I thought maybe they would leave a trail of breadcrumbs for me to figure out what was going on.

The breadcrumbs led to revealing videos in the public record, but largely unknown to the average American. One star in these videos was Obamacare architect Jonathan Gruber, an economist at the Massachusetts Institute of Technology.

 Jonathan Gruber: Look, I wish Mark was right. We could make it all transparent, but I’d rather have this law than not.

In a series of remarkable policy talks at conferences and in academic settings, Gruber seems to brag that Obamacare only passed through its lack of transparency and the stupidity of voters. For example, Gruber says he and other backers of Obamacare hid the fact that it would be costly to healthy Americans.

Gruber: If you had a law which said healthy people are gonna pay in, you made [it] explicit that healthy people pay in and sick people get money, it would not have passed, okay. Lack of transparency is a huge political advantage and basically, you know, call it the stupidity of the American voter or whatever, but basically that was really, really critical to getting the thing to pass.

But it’s another Gruber video that Weinstein says made him shiver. A video that foreshadows a little known sea change in U.S. tax structure mandated under Obamacare.

Weinstein: When I realized they were going after that, the hairs on the back of my neck stood up. Like, why haven’t I heard this before?

Gruber: It’s a very clever, you know, basic exploitation of the lack of economic understanding of the American voter.

Weinstein: When he’s talking about the lack of basic economic understanding of the American people, when he’s talking about the American people being stupid, he’s pretty much talking about the ‘Cadillac tax’.

Weinstein wondered, what is the Cadillac tax? That was explained in another video he discovered, this one featuring Obamacare architect Ezekiel Emanuel in 2014. Emanuel said the Cadillac tax would go after a little known tax break millions of Americans get on their work insurance.

Ezekiel Emanuel: It is the single biggest tax break in the American tax code. It’s worth $250 billion dollars. To compare, for those of you who want to keep track, the mortgage deduction, sacrosanct, $70 billion dollars.

Weinstein: And it took me some time to figure it out, but I realized that they were going after that tax break and people are going to lose their tax break without knowing they were losing their tax break. That’s incredible.

Weinstein learned that since World War II, Americans’ health insurance benefits from work haven’t been taxed as income. The Obamacare Cadillac tax will change that.

It slaps a 40% tax on work-provided insurance policies valued above $10,200 for an individual or $27,500 for a family. For example, say your individual plan costs $15,200. You’ll pay 40% of the amount over $10,200that’s 40% of $5,000, which means an extra $2,000 to the IRS at the end of the year.

In another video Weinstein found, Emanuel describes how he had to convince President Obama and his political team to support the tax.

Emanuel: The other side, inside the White House, that other part of the health team and especially the political team, which David Axelrod headed up, hated this idea.

One reason they hated it, Emanuel explains, is because in 2008, Obama’s Republican opponent, John McCain, proposed eliminating the tax benefit, in effect imposing a giant new tax and at that time, Obama was against it.

Barack Obama, October, 2008 campaign speech: John McCain calls these plans ‘Cadillac’ plans. And in some cases it may be that a corporate CEO may be getting too good of a deal. But what if you are a line worker, making a good American car like the Cadillac? What if you are one of the steel workers, who are working right here in Newport News? And you have given up wage increases in exchange for better healthcare? Well, Senator McCain believes you should pay higher taxes too. The bottom line, the better your healthcare plan, the harder you fought for your good benefits, the higher the taxes you’ll pay under John McCain’s plan.

But now, under Obamacare, he’d be imposing exactly what he criticized McCain for proposing: a massive tax hike on American workers’ health insurance. Emanuel would later reveal how it took some convincing to get the President to go along.

Emanuel: The President campaigned against John McCain, who wanted to get rid of the tax exclusion entirely with over $100 million dollars’ worth of ads saying, you know,’Republicans are gonna tax your health benefits for the first time ever’. This was an enigma. The President was going to go back on his word.

Weinstein: They wanted to get at your tax break and they couldn’t do it overtly, because Senator Obama in 2008 spent $100 million destroying John McCain.

Emanuel goes on to say in the video that he helped convince President Obama to impose the Cadillac tax on American workers with the idea that it would reduce health care costs. But how to convince the public to accept a huge new tax?

Gruber says they decided to use wordplay: the public would be told it was a tax on insurance plans rather than consumers.

 Gruber: Calling it a tax on insurance plans rather than a tax on people, when we all know it’s really a tax on people who hold those insurance plans.

 Gruber: You say,’Well, that’s pretty much the same thing. Why does it matter?’ You’ll see and they were both in and that passed, because the American voter is too stupid to understand the difference.

Gruber: We just tax the insurance companies. They pass it on in higher prices that offsets the tax break we get. It ends up being the same thing.

Sharyl: They were going to be able to tax the American public, but not call it a tax on the American public?

Weinstein: Well, they were going to tax the American public without the American public knowing it was a tax on the American public, because they were going to put the tax on the insurance plan, which would then be passed through to the American public through premium increases.

After some of Weinstein’s stunning video discoveries were reported on the news in 2014, Gruber apologized and called his remarks “inexcusably arrogant”.

House Committee on Oversight and Government Reform, Dec. 9, 2014 Hearing:

Gruber: In excerpts of these videos, I am shown making a series of glib, thoughtless and sometimes downright insulting commentsI know better. I am embarrassed and I am sorry.

Both Gruber and Emanuel declined comment for this report. President Obama has said he does not agree with Gruber’s assessment of the American public’s intellect, and that the former adviser’s views do not reflect the process. The White House wouldn’t offer further comment.

As for Weinstein: he sees the future. Not because he’s clairvoyant, but because the Obamacare architects laid it all out in those videos. He says the looming Cadillac tax will cause employers to drop insurance plans. More Americans will be forced to buy policies on the Obamacare exchange, where premiums and deductibles are quickly rising.

Weinstein: And the high-wage employees will not have the benefit of a subsidy. The lower-wage employees will, which turns a regressive policy into a progressive policy. I kind of jokingly refer to it as the Super Bowl of progressive politics, because you’re gonna go from regressive to progressive and people aren’t even gonna know what hit ’em. Everything I know about this came from people on the left. It came from Jonathan Gruber. It came from Zeke Emanuel. It came from other architects or other academics. It’s their words and that’s kind of the strength of what I’ve been able to find. My words really aren’t important. It’s their words. It’s all there on video.

Gruber: Call it the stupidity of the American voter or whatever, but basically that was really, really critical to getting the thing to pass.

Why is it called the Cadillac tax? It’s on the most generous, high-end plans. The Cadillac tax was supposed to start in 2018. As word of it sunk in, the tax has become so unpopular among Democrats, Republicans, corporations and unions that Congress voted to postpone it until 2020. The problem is: employers are already anticipating it and adjusting by downgrading or even cancelling policies they offer at work.