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Backdoor Cost Curve-Bending

It sounds like the insurers aren't too keen on the insurance company tax Max Baucus is now flirting with for his Finance Committee compromise:

Insurers and many Republicans in Congress oppose the fees, saying they would be passed on to families and employers who buy insurance. Robert E. Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group, said the fees would “make coverage less affordable.”

A recent report by Oppenheimer & Company, the investment bank, said, “It will be very difficult for the Senate Finance Committee to structure the fees in a way that they won’t be immediately passed on to customers in the form of higher premiums.”

But, of course, this seems to be precisely the point. As the Times Robert Pear notes in the same piece: "The hope is that employers would buy cheaper, less generous coverage for employees, thereby reducing the overuse of medical services." 

It's actually a pretty brilliant move. The most stubborn challenge the president faces on health care may be this one, described here by Matt Yglesias:

On the one hand, some members want to try to finance reform through the mechanism of a “surtax” on wealthy tax payers. This is consistent with the President’s campaign promises. On the other hand, some members want to try to finance reform through curbing the current practice of excluding employer provided health benefits from taxation. This is not consistent with the President’s campaign promises, but it achieves the President’s goal of “bending the curve” over the long run since the government will no longer be encouraging people at the margin to consume health services rather than other goods. The problem is that though both approaches have some support, neither has majority support. And the problem is re-inscribed within the framework of the administration’s statements—on the one hand, Obama’s promised to bend the curve, which implies taxing benefits, but on the other hand Obama’s promised not to tax the middle class, which implies going with the surtax [emphasis added].

The tax on insurance companies provides an elegant solution to this problem: It falls on the people who consume the generous health care, accomplishing the desired cost-curve bending. But Obama and the Democrats can say they're taxing insurance companies, not the middle-class. And, better yet, to the extent people see their employee contributions go up or their benefits go down, they'll probably end up blaming the insurers, since that's their reflex--even though, ironically, this may be one time when they shouldn't. (Which, I'd guess, is what the insurers are really worried about.)

Works for me.