The new Republican health reform plan – taxing health benefits

2013

Republicans have released their ideas for health care reform. Here are the essential elements, none of which address the basic problems of cost, quality or access to health care paid for via health insurance. What we have in total is a proposal that makes health coverage less affordable for many Americans. Pooling small business simply reallocates the same costs. The proposal for pre-existing conditions moves costs around while trying to force premiums below that possibly required to cover costs. Such risk pools shouldn’t even be necessary. Isn’t the real issue how people get to be uninsured with a medical condition in the first place?

Play it again Sam, this is amateur night!

Allowing Americans to purchase health insurance across state lines;

Enabling small businesses to pool together to create “association health plans;”

Medical malpractice reform; and

Expansion of access to Health Savings Accounts (HSAs)

The measure also would permit people with pre-existing conditions to switch to another health plan even if their prior coverage was in the individual market, not just employer-sponsored coverage. Further, the bill provides $25 billion for state high-risk pools and limits the premiums in the pools to twice the average cost of insurance sold in the state.

The legislation proposes a significant change to the current tax treatment of health insurance. Regardless of the actual cost of the health plan, people purchasing their own coverage would receive an above-the-line standard deduction for health insurance (SDHI) of $7,500 for individuals and $20,000 for families, indexed annually for inflation. The SDHI would also be applied against payroll taxes. For those who receive employer-sponsored coverage, the tax exclusion would be capped at the same SDHI level ($7,500/$20,000), with any amount over that threshold taxed as wages.

By comparison, the high-cost plan (“Cadillac”) tax imposed by PPACA, effective in 2018, taxes amounts in excess of $10,200 for individuals and $27,500 for families, also indexed. The measure would not change the employer deduction for health expenses. However, both employers and employees would be subject to their respective portions of payroll taxes for amounts above the thresholds.

2 comments

  1. Allowing people to purchase insurance across state lines would drive prices down. It’s called competition and it works every time.

    Enabling small businesses to pool together to create “association health plans;” is a good idea. There is strength in numbers. If 1000 Hamburger joints banned together they could get better prices from an insurance company that specializes in hamburger joints. This is in concert with industry specialization.

    Medical malpractice reform is very much needed. Behind every ambulance are 7 attorneys chasing it to thee scene. This is why a hospital charges a patient $35 for an aspirin.

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    1. Explain how competition across state lines would work. Health care and health insurance does not operate like any other product or service. How would an insurance company based in Ohio be competitive in NJ for example? What will they compete on? Not the cost of health care, how will they build provider networks that can gain the best discounts?

      If competition works every time how come adding more physicians and hospitals in an area drives costs up, not down? It’s because health care creates its own demand, unlike any other service.

      Pooling of small business’s does nothing to manage or lower health care costs in total. They may gain some minor administrative savings, but if there was so much strength in numbers, why are huge employers who are self-insured still complaining about health care costs? It’s because the real cost has nothing to do with the insurance company, it’s health care. That’s what politicians don’t get.

      Dick

      Richard D Quinn

      Blog http://www.quinnscommentary.com Twitter @quinnscomments

      >

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