In May, 2009 the finance committee released its policy options on several aspects of the health reform plan. The bill explores several options for funding the proposed changes to the health care system. Max Baucus, Chairman and Chuck Grassley, Ranking Member, published the committee's policy options.
Although no conclusion was reached, the committee was advised to look at several items. The one getting the most attention is whether or not to tax employees on the value of their employer's health plan contribution. Currently the value of the health insurance provided to employees is not counted as income and taxed.
In the opinion of the Committee this tax-free status encourages employer's to offer plans that are too rich, too overly generous and therefor promote the overuse of health care services and drive up the cost of health care. The Committee takes the view that employer sponsored health plans, the value of which is not counted as income to the employee, results in the taxpayers subsidizing the plan. Of course, the employees who participate in the employer sponsored health plans are themselves, the taxpayers.
There was no discussion of the reality that fewer and fewer employers pay 100% of the health insurance premium for the plans offered to their employees. In fact, in many areas, especially the small business market, employees themselves are paying as much as 50% or more of the premium. The smaller the company, the more likely the employee will be paying a bigger part of the premium.
It is unlikely that this proposal will go away. By taxing the employees for the value of their employer sponsored plan, the federal government potentially could save more than 100 billion dollars.
And what about the states, like Connecticut, that have a state income tax? Isn't it likely that the state will also want to consider the value of the health insurance plan to be considered taxable by the state as well.
The debate will continue. Next, the plans for modifying the tax benefits of HSA and FSA accounts.
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