Are the Health Plans of the Very Rich Different from Yours and Mine?

Yesterday, the New York Times published an intriguing story about "Cadillac" (that is, expensive) health insurance plans,

Goldman Sachs is one of the nation’s richest banks, and hundreds of top Goldman employees have a health care package to match — one of the 'gold-plated Cadillac' plans cited by those involved in the health care debate in Washington.

Goldman’s 400 or so managing directors and its top executive officers participate in the bank’s executive medical and dental program as part of their benefits, according to documents filed with the Securities and Exchange Commission. The program generally costs the bank $40,543 in premiums annually for each participant’s family.

Those taking part in the plan include the company’s chief executive, Lloyd C. Blankfein, and four other top officers, as well as managing directors, whose base salary is $600,000.

Goldman’s medical coverage entered the health care discussion on Sunday when David Axelrod, senior adviser to President Obama, cited the Goldman program as an example of the expensive benefits the administration might consider taxing to help pay for its health care program.

'The president actually was asked this the other day by Jim Lehrer, and what he said was that this was an intriguing idea to put an excise tax on high-end health care policies like the ones that the executives at Goldman Sachs have, the $40,000 policies,' Mr. Axelrod said.

A proposal by Senator John F. Kerry, Democrat of Massachusetts, would impose an excise tax on the insurers that issue policies like Goldman’s, with the expectation that the insurers would pass along most, if not all, of the cost to employers who buy the plans.

Leaders of the Senate Finance Committee, which is working on bipartisan version of the health care legislation in Congress, had long expressed interest in taxing some employer-provided benefits — a move many budget experts say would help slow the steep rise in health costs.

Negotiators have not yet determined the value of the plans that would set off a tax on the insurance companies; the numbers under discussion range from $20,000 to $40,000 annually, a senior administration official said.

The lower end of that range would increase the amount of money the tax would raise but would also hit some middle-class workers, whose unions in some cases negotiated robust health benefits in lieu of pay increases. Typical employer-provided plans cost $13,000 to $20,000 per family, depending on the location and the age of the plan participants.

A health care package costing $40,000 or more a year would generally have no co-payments or deductibles, according to Paul Fronstin, an analyst at the Employee Benefit Research Institute, a Washington nonprofit that studies benefits. It would also have no limits on doctors or procedures, no restrictions on pre-existing conditions and no requirements for referrals.

Few people have such policies, Mr. Fronstin said. 'It would only be top executives who run big businesses, mainly people in the C suite,' said Mr. Fronstin, referring to companies’ chief officers.

It was not clear from this article how many top corporate executives have such plans, and whether leaders of other kinds of organizations, like large not-for-profits, also have them.

My main concern about such plans is not how much they contribute to top corporate leaders' compensation packages. Such packages are generally already so outrageously huge that providing $40,000 rather than $13,000 worth of health insurance is a trivial increase. My concern is not that plan recipients' demands for health care will collectively increase health care costs, because they include only a tiny portion of the population.

My main concern, instead, is how much these plans further insulate already cocooned top executives from the vicissitudes of daily life, particularly related to coping with our current dysfunctional health care system. What benefits executive health care plans provide is not clear, but presumably they insulate executives from having to deal with the managed care/ health insurance bureaucracy which frustrates patients seeking particular services, but not necessarily the most expensive, or least beneficial services. Such executives might thus not have gut level appreciation of how dysfunctional the health care system has become for even insured patients. Since top executives often are disproportionately influential members of the "superclass," their disconnection from the realities of dysfunctional health care is likely to translate into little real support by the powers that be for meaningful health care reform. There support may be further retarded by the influence of their fellow superclass members whose personal fortunes depend on the status quo in health care.

Real improvement of health care may depend on finding leaders who have better understanding of the plight of real people.