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Taxing Employer Health Benefits
Old 03-15-2009, 11:40 AM   #1
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Taxing Employer Health Benefits

Saw this article, and thought it was interesting, given the President's position in the campaign. Personally, I see a disconnect between taxing earned income but not health benefits, but, on the surface atleast, the President's willingness not to oppose this should Congress put it forward, seems pretty disingenuous.


NYT: Obama open to taxing health benefits - The New York Times- msnbc.com
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Old 03-15-2009, 11:58 AM   #2
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IMO, this is one of the most egregious inequities in the tax code. Folks who work for companies who don't provide health insurance and retirees have to buy their health insurance with after-tax dollars, while those who have it provided (including retirees with health insurance benefits) get to treat it as a pre-tax benefit. I think it should be treated the same way for all, either taxed for both groups, or preferably, an above-the-line deduction from AGI for those who must purchase it themselves.
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Old 03-15-2009, 11:59 AM   #3
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I support the decoupling of health insurance and employment, but I'm not convinced this is specifically the right way to do it. It would certainly do that, but if not done right it could be tantamount to a pretty major tax increase on business and/or employees.

This sounds a lot like the McCain plan without the corresponding personal tax credit for buying health insurance.
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Old 03-15-2009, 12:10 PM   #4
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I support the decoupling of health insurance and employment, but I'm not convinced this is specifically the right way to do it. It would certainly do that, but if not done right it could be tantamount to a pretty major tax increase on business and/or employees.

This sounds a lot like the McCain plan without the corresponding personal tax credit for buying health insurance.
If they outlawed denying coverage for pre-existing conditions and gave everyone a tax credit for health insurance and then taxed employer provided health insurance, then I think it could work. This would allow employees to shop and buy cheaper insurance than what their employer provided. And it would make it fairer to those who don't work and have to buy health insurance on their own. Perhaps it would make the insurance industry compete for your business and insurance costs would drop. I can dream, can't I?
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Old 03-15-2009, 12:11 PM   #5
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I support the decoupling of health insurance and employment
I really agree with this point, it makes no sense at all to tie health care to employment.

I also agree that in the interm, we should either tax it for everyone or not tax it at all. I don't believe health care should be considered a luxury, therefore I don't believe it should be taxed.
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Old 03-15-2009, 12:14 PM   #6
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If they outlawed denying coverage for pre-existing conditions and gave everyone a tax credit for health insurance and then taxed employer provided health insurance, then I think it could work. This would allow employees to shop and buy cheaper insurance than what their employer provided. And it would make it fairer to those who don't work and have to buy health insurance on their own. Perhaps it would make the insurance industry compete for your business and insurance costs would drop. I can dream, can't I?
Of course, for those who burn through COBRA, HIPAA (Kennedy-Kassebaum) already does provide this protection for pre-existing conditions. Where HIPAA fails is that it does nothing to guarantee that such insurance is affordable -- at the federal level there is no limit to what insurers can charge for this.

But if you limit what insurers can charge to make insuring those with pre-existing conditions affordable, you have to create an insurance mandate to avoid adverse selection.

Ultimately, the only way to guarantee somewhat affordable coverage for everyone with pre-existing conditions IS a mandate that everyone carry insurance.
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Old 03-15-2009, 12:28 PM   #7
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If they outlawed denying coverage for pre-existing conditions and gave everyone a tax credit for health insurance and then taxed employer provided health insurance, then I think it could work. This would allow employees to shop and buy cheaper insurance than what their employer provided. And it would make it fairer to those who don't work and have to buy health insurance on their own. Perhaps it would make the insurance industry compete for your business and insurance costs would drop. I can dream, can't I?
This is a major drawback. The main advantage of having employee health coverage is the group rate, much cheaper than when you buy it on your own.

The idea of letting people go out with a credit to buy their own individual policies would be good for insurers, since they can rake in larger overall premiums while cherry picking the healthy prospects.

Groups, such as employers have the negotiating power to get insurance at a lower rate per insured since they are bringing in many individuals and thus are selling the insurance wholesale manor raking in a large premium payment for in one shot. The only way an individual would be able to compete would be to join some sort of group, but even that has yielded less than adquate coverage in most cases.

Employer based coverage especially from large employers and government employers is the gold standard of insurance. Such a plan to diminish or tax this benefit would come to stiff opposition and would result in political suicide.

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Old 03-15-2009, 12:43 PM   #8
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Of course, for those who burn through COBRA, HIPAA (Kennedy-Kassebaum) already does provide this protection for pre-existing conditions. Where HIPAA fails is that it does nothing to guarantee that such insurance is affordable -- at the federal level there is no limit to what insurers can charge for this.
Nope - you can be outright denied by a private insurer, which means then that you're only option is to accept a waiver or enroll in the more expensive state "risk pool" insurance.

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Old 03-15-2009, 01:04 PM   #9
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If they outlawed denying coverage for pre-existing conditions and gave everyone a tax credit for health insurance and then taxed employer provided health insurance, then I think it could work.
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But if you limit what insurers can charge to make insuring those with pre-existing conditions affordable, you have to create an insurance mandate to avoid adverse selection.
And then, you have to mandate what insurers must cover to avoid healthy people from getting cheap insurance with a lot of exclusions and then jumping over to a more comprehensive plan once they get sick.

Welcome to the high cost of health insurance in NY, NJ and elsewhere.

So basically you can have a very expensive health care scheme that covers nearly everyone or a less expensive scheme that basically only covers the young and healthy.
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Old 03-15-2009, 01:59 PM   #10
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And then, you have to mandate what insurers must cover to avoid healthy people from getting cheap insurance with a lot of exclusions and then jumping over to a more comprehensive plan once they get sick.

Welcome to the high cost of health insurance in NY, NJ and elsewhere.

So basically you can have a very expensive health care scheme that covers nearly everyone or a less expensive scheme that basically only covers the young and healthy.
This is the problem. When I lived in NY state, all of the individual policies were guaranteed-issue and community-rated. As a consequence, there was only one company that offered a high-deductible fee-for-service plan to individuals. All the other plans were HMO's. Healthy folks would buy the cheaper high-deductible plan, and switch to an HMO if they became chronically ill (if the switch made financial sense). The result - adverse selection into the HMO's and their premiums shot way up. People will always game the system. That is why, if we are serious about universal coverage, we need to have mandated insurance and only one risk pool with everyone in it. Preferably, this should be done on a nationwide basis with possible local premium pricing to reflect geographic differences in medical costs. That way the policies could be made completely portable and tied to the inidvidual for life.
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Old 03-15-2009, 02:02 PM   #11
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That is why, if we are serious about universal coverage, we need to have mandated insurance and only one risk pool with everyone in it.

Agree. I've yet to hear a workable alternative.
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Old 03-15-2009, 02:09 PM   #12
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That is why, if we are serious about universal coverage, we need to have mandated insurance and only one risk pool with everyone in it. Preferably, this should be done on a nationwide basis with possible local premium pricing to reflect geographic differences in medical costs. That way the policies could be made completely portable and tied to the inidvidual for life.
Agreed. We need to pick our poison -- either a government universal coverage mandate or continued inaccessibility to the people who have no group insurance and have pre-existing conditions.

Anything else is hoping for a free lunch that doesn't exist. We can not affordably provide universal coverage for people with pre-existing conditions without a mandate. Anyone who could come up with a workable alternative to affordably cover everyone without a mandate deserves a Nobel Prize for both medicine AND economics...
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Old 03-15-2009, 02:16 PM   #13
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Saw this article, and thought it was interesting, given the President's position in the campaign. Personally, I see a disconnect between taxing earned income but not health benefits, but, on the surface atleast, the President's willingness not to oppose this should Congress put it forward, seems pretty disingenuous.


NYT: Obama open to taxing health benefits - The New York Times- msnbc.com
I'm in favor of eliminating the deduction for employer health insurance (for the same reasons I'm in favor of eliminating the deduction for mortgage interest, religious contributions, local taxes, etc.). This one is particularly bad because we don't provide the same deduction for individual insurance.

Obama's opinion is questionable. This Meet the Press clip seems to say "no" Greg Mankiw's Blog: A Welcome Hypocrisy

My guess is that it's something he's publicly against, but would accept if "forced to" in order to get a bi-partisan bill.
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Old 03-15-2009, 03:24 PM   #14
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Well, Being self Employed most of my Life and not being able to Deduct those costs from my Income for many yrs, while everyone else, was getting it included in with their Bnefits and Incomes? tax Free? Thought it wasn't fair..

Of course , for Yrs that cost was minimal, but over the past 10 yrs? Ave $7,000 yr for a Single and $14,000 yr for Family In a Group Plan? and the Co.'s Deduct it off their Taxes?
Sorry, but that's just too much tax dollars to leave off the table..

And of course, if any exceeds a person 7.5% of their Groos Income , They can deduct it just like I can.. but not the 1st 7.5% ( Ave $50k yr = First $3,500 )

Otherwise,Get the tax laws changed for EVERYONE, not just a select group..
and good luck doing that, after your Congressmen sees the New Windfall in taxes comming in..and all the Poor Crying for Freebies..and More $ for Education and Don't forget to fund Health care for them ..
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Old 03-15-2009, 03:34 PM   #15
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Well, Being self Employed most of my Life and not being able to Deduct those costs from my Income for many yrs, while everyone else, was getting it included in with their Bnefits and Incomes? tax Free? Thought it wasn't fair..



If you file Schedule C "Profit or Loss From Business / sole proprietorship" health insurance premiums are most certainly deductible.
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Old 03-15-2009, 03:37 PM   #16
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Well, Being self Employed most of my Life and not being able to Deduct those costs from my Income for many yrs, while everyone else, was getting it included in with their Bnefits and Incomes? tax Free? Thought it wasn't fair..
What you say is certainly true for early retirees who buy their own health insurance. But if you're truly self-employed, isn't the cost of health insurance deductible from Schedule C?

[edit to add: Already addressed, never mind, move along, nothing to see here...]
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Old 03-15-2009, 09:13 PM   #17
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Saw this article, and thought it was interesting, given the President's position in the campaign. Personally, I see a disconnect between taxing earned income but not health benefits, but, on the surface atleast, the President's willingness not to oppose this should Congress put it forward, seems pretty disingenuous.


NYT: Obama open to taxing health benefits - The New York Times- msnbc.com
I see the logic and even fairness of taxing benefits (of many kinds, not just health insurance). Problem is, this will just increase everyone's tax bill while increasing the gummints ability to spend, spend, spend, and leave all of us worse off than before. Whenever we get a chance to tax ourselves (or our "rich" neighbors) we should insist on it being tax neutral. Otherwise, it turns more of OUR money over to someone else who thinks they know a better way to spend it for US.

Personally, because I have the biggest stake in my own money and how its spent, I think I'll usually do a better job of spending it than some bureaucrat. Don't mean to be political here, both (all) parties work the same when we give them our money. They use it to buy our votes and hide the fact that it was our money to begin with. End of rant, sorry!
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Old 03-15-2009, 11:00 PM   #18
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Old 03-16-2009, 08:10 AM   #19
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Seems to me if taxing all HB starts, then they should:

1) eliminate the limit on % of income before deductions occur

2) provide 1099 for all those accessing health care for free

This seems again to be another attack on those who have acheived verses those who have not. Ultimately, there is only one long term change that will occur when this happens:

THOSE WHO HAVE CONTROL WILL SIMPLY INCREASE THEIR INCOME.

BOSSES WILL RAISES THEIR PAY BUT NOT THE WORKERS.

DOESN'T THIS HAPPEN EVERY YEAR IN CONGRESS AUTOMATICALLY?

Obama said I want everyone to have coverage the same as me in Congress, just didn't say where you will pay vs Congress.

I had a discussionwith my fathers MD, he schooled until the age of 33 before he had any income as a Doctor. Doesn't he and others who paid to get a better job deserve to take home more money? Socialism would say he still only deserves the same loaf of bread as others. So where will the MD's come from in 20 years?
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