Sunday, January 21, 2007
President Bush intends to use his State of the Union address Tuesday to tackle the rising cost of health care with a one-two punch: tax breaks to help low-income people buy health insurance and tax increases for some workers whose health plans cost significantly more than the national average.
....The basic concept is that employer-provided health insurance, now treated as a fringe benefit exempt from taxation, would no longer be entirely tax-free. Workers could be taxed if their coverage exceeded limits set by the government. But the government would also offer a new tax deduction for people buying health insurance on their own.
It isn't clear that this will increase the number of people with health insurance, but it's likely to shift the purchase of health insurance away from the employer and to the individual. That's not necessarily a bad thing. It's much better to own your own policy than to rely on a third party to buy it. There's more portability and more of a choice - at least in theory. The choice part is what's difficult. Individual policies are difficult to find, and they tend to be more expensive than those offered at group rates to employers. On the other hand, if the demand shifts toward individual policies, then won't insurance companies have an incentive to shift their focus to the individual market and away from group markets? Health insurance would become like car insurance and life insurance. And that would be a good thing.
Here are the details:
It would work like this: The administration would cap the amount of benefits that can remain tax free at $15,000 for a family and $7,500 for an individual. Anyone whose health insurance cost more than that would pay taxes on the difference. For example, a family with coverage costing $16,000 a year would pay taxes on $1,000.
The cap would also be used to establish the amount of the new deduction for people who lack coverage. In this example, a family buying insurance on its own could take a $15,000 deduction — even if the insurance cost less. The cap would rise with some measure of overall inflation, but would not necessarily keep pace with the costs of medical care and health insurance.
A White House official, speaking on condition of anonymity so as not to upstage the president, said, “The vast majority of people with employer-provided coverage will benefit as well.”
The article says that the average cost to a family for health insurance is $15,000 per year, half that for an individual. That's probably not affordable for someone making $10-12 an hour. One could argue that wages would go up if employers were not purchasing health insurance, and maybe they will. But it's been my experience as an employer that when an employee is given the money instead of th health insurance, they spend it on something else and then complain they don't have health insurance coverage. Can that attitude be changed?
posted by Sydney on 1/21/2007 11:20:00 AM 6 comments
The short answer is no. Many of those without insurance are students finishing college and waiting for their first job, or those between jobs, waiting for their new job's insurance to kick in. We then have a surprising group that feel no compunction to have, or pay for, health insurance. They feel it is simply a "right" to be cared for in the best manner, and are quit willing to sue to achieve this goal.
By 12:47 PM, at
I agree with you, Steve. I heard an entertaining segment on talk radio when Massachusetts passed their comprehensive insurance reform and some young guy called in to complain that he shouldn't have to buy health insurance, and the otherwise astute host agreed. They both seemed to think that youth and good health habits would prevent illness completely. This attitude is extremely prevalent- and partly the fault of organized medicine.
By 12:57 PM, at
Absolutely agree with both Steve and Danie.
By 11:14 PM, at
Just to add something.
By 11:38 PM, at
My wife and I own a business, and the business pays for our health insurance. Because of our age and the fact that it is just the two of us, our insurance costs $19K per annum. Under Bush's new plan, we would be taxed on the $4K premium above the family limit of $15K.
According to the Kaiser Family Foundation, about 2/3 of the uninsured earn less than 2X's the Federal Poverty Level, and almost all earn less than 4X's.
By 11:31 AM, at