03/18/2010 05:12 am ET | Updated May 25, 2011

A Damoclean Sword Over Health Care Reform

The sword of Damocles is a useful metaphor for understanding the ramifications being experienced by President Obama as the Senate and House health care "reform" bills are merged into one in coming days.

There remains an ever present peril to Obama if a gatekeeper is not established to keep in check premiums that insurers will charge. Americans will revolt by over what they have to pay over the next 5+ years and thereafter. This revolt may well go all the way to the ballot box in 2012, if not sooner.

In his weekly (January 9) radio and internet address, President Obama spoke about the benefits of the health care reform legislation that will land on his desk for signature. Some of the benefits will be enacted right away, but comprehensive reform will not be fully implemented until 2013 or 2014. The President then said that we would see unreasonable insurance costs done away with, but this was merely a gloss on the subject. There is as yet no effective check on what the insurance industry will be charging the average American for health insurance coverage on an ongoing basis once reforms become law.

An ever present peril, as if a Damoclean sword, swings precariously above President Obama if he lets health care reform become law without ensuring that premiums will go down for Main Street. After all, if he thinks the insurance industry will be kind with its premiums to the average Joe, think again. Look what the credit card industry is doing to Main Streeters this month with costs, fees and charges left and right, in anticipation of the new law imposing caps on interest rates going into effect next month. Look at the shafting Wall Street's too-big-to-fail banks have given Main Street community banks. This is why we need to see the House-Senate "ping pong" match (in lieu of a conference committee) ensure premiums cannot be controlled solely by the insurance industry -- a public option would have cured this; without it, lifting the antitrust exemption must then become a non-negotiable item. A national insurance exchange marketplace, and not state-by-state ones, is also a critical piece of the legislative pie on this score.

Of particular interest is the so-called cadillac tax in the Senate bill the President now favors; you know, the one that places a tax on individual policies exceeding $8,000.00 and $23,000.00 for families. These amounts will be adjusted using the cost of living index (COLA) plus 1%. According to the Social Security Administration, COLA for 2011 is expected to be 1.4% in January 2012. So, what does this say about imposing Obama's so-called health care excise tax on individuals?

Let's say an individual paid $450.00 per month for 2009, or a yearly total of $5,400.00. Without some effective gatekeeper on keeping insurance premiums down, the likely increase per year on a $5,400.00 policy will be 10% annually plus a COLA of 2.4%. By 2014, this plan will cost the individual $8,696.75, with the part that is taxed totaling $536.75. In 2015, the part taxed would be $1,406.43 with the total cost of a policy being $9,566.43.

If the annual cost of an individual policy in 2009 was $6,000, by 2015 that policy would cost $10,629.37, with the part subject to the excise tax being $2,469.37. And, if an individual policy cost $6,600.00 in 2009, that policy will cost $11,692.30 in 2015, with the part taxed being $3,532.30.

These figures are incredulous and organized labor is aghast at all this, but this is precisely what will occur if the President gets his way with this so-called cadillac tax and having no effective check on what premiums the insurance industry can, and, no doubt, will charge Americans. Remember, too, health care reform requires that every single American have coverage, so unless we speak up right now, what we all will be paying out-of-pocket will measure up to the screwing Main Street has received from Wall Street and from the credit card industry.

A Damoclean sword remains swinging over the President's head, indicating, as the most powerful person in America, his fortunes are precarious if he does not ensure that insurance premiums are held in check that Americans must pay. This translates into potentially huge political losses in 2010, and, again, in 2012. This sword also swings mightily over the heads of consumers because an ever present peril remains if we cannot do anything to prevent insurance premiums from increasing willy-nilly so as to cause payouts in the cadillac tax, as set forth above. The clock is ticking....