[Pen-l] McCain plan taxes Health benefits

["Charles Brown" <charlesb@xxxxxxxxxxxxxxxxxxxxx>]

McCain plan taxes Health benefits


McCain's health insurance plan: More radical than  Democrats'?

09:25 AM CDT on Saturday, August 16, 2008

By JASON  ROBERSON / The Dallas Morning News  
[jroberson@xxxxxxxxxxxxxx] 

Democratic health care proposals may have  gotten more attention during
the 
primaries, but Republican John McCain's plan  just might be more
revolutionary.

The GOP nominee-to-be wants to tax  workers on the value of the
insurance 
they receive from employers.

At  the same time, everyone would be offered a federal tax credit to
help 
them pay  for insurance - whether a company plan or one purchased on
their own. 
Buyers  could subtract up to $5,000 from their federal tax tab come
April 15. 
Or they  could simply sign over the credit to an insurer in order to
purchase  
coverage.

The goal, Mr. McCain said, is to give those without  company-provided
health 
insurance the same tax advantages as those with  coverage through work.
It 
would also encourage individuals to shop for less  expensive insurance,
his 
supporters say, pushing prices down.

In  contrast, Democratic presidential contender Barack Obama says he
wants to 
 expand Medicaid, the government health care program for the poor, and

require  employers to either provide health insurance to their workers
or contribute 
to  a newly created public insurance program.

North Texas employers are not  saying they would drop employee coverage

altogether if Mr. McCain's plan were  enacted.

But some do say the plan, which Mr. McCain detailed in July,  would
encourage 
young and healthy workers to forgo company coverage,  purchasing
insurance on 
their own rather than paying income taxes on the  benefit. That would
leave 
employers with only the costly sick workers to  insure.

And that, they said, could eventually lead to the death of 
company-provided 
health plans.

"If health benefits became taxable  income, yes, I do think that more
people 
would opt out," said Andrew Webber,  president and chief executive of
the 
National Business Coalition on Health, a  nonprofit group of
employer-based health 
care coalitions, including the  Dallas-Fort Worth Business Group on
Health.

Bob Queyrouze, who oversees  benefits for 1,200 workers at the Federal

Reserve Bank of Dallas, calls Mr.  McCain's plan "radical." "Long term,
it would be 
destructive to the system,"  Mr. Queyrouze said.

He adds that he doesn't think the health insurance  industry could
respond 
quickly enough to handle a large influx of individuals  looking to buy
their 
own, more affordable policies.

Joe Zubretsky,  chief financial officer of Hartford, Conn.-based Aetna
Inc., 
said the insurer  will be ready regardless of who becomes president or
if 
either of the  proposals is implemented. However, he added, "We believe

conventional wisdom  will prevail and the employer-based system will
prevail."

Last year,  the employer-paid portion of a family plan averaged $8,824
per 
employee,  according to Kaiser Family Foundation, a nonprofit health
research 
group.  Workers kicked in an additional $3,785 for such family
coverage, the 
group  said.
That means, under Mr. McCain's plan, an employee with a taxable  income
of, 
say, $50,000 last year, would have instead paid taxes on $58,824, 
after the 
company-paid premium amount was added on.

The McCain plan  would at the same time offer a $5,000 tax credit for
family 
coverage ($2,500  for individual coverage). Those whose policy cost
less could 
save the  remainder in a Health Savings Account to cover future health
costs.

Mr.  McCain said the new tax on the employer-provided portion of
coverage 
would pay  for the tax credits - essentially rerouting $200 billion in
existing 
tax  subsidies.

Critics question whether individuals - especially those with  chronic
or 
pre-existing medical conditions - would be able to find health  plans
they could 
afford.

Mr. McCain addresses this question by saying  he would create a
federally 
supported plan to insure those denied  coverage.

Opponents also say the amount of the tax credit will not be  enough to

purchase comprehensive coverage.

McCain supporters say the  tax credits were intentionally set lower
than the 
amount typically spent on  employer-provided health plans. That is to 
encourage individuals as well as  employers to shop for less expensive
policies, said 
John Goodman, president of  the Dallas-based National Center for Policy

Analysis, a conservative think  tank, and a health policy adviser to
Mr. McCain's 
campaign.

This would  help rein in the nation's ballooning health care costs, Mr.

Goodman argued.  Last year's average total premium of $12,106 for
family coverage 
was up 88  percent from 2000, according to the Kaiser foundation.

The tax credit  "would not subsidize bells and whistles [marriage
counseling, 
acupuncture,  etc.] as the current system does," Mr. Goodman said in an

e-mail.

While  most company plans do not cover marriage counseling or
acupuncture, 
many do  cover such costly services as infertility treatments and
psychiatric 
analysis  sessions. Presumably, those who did not need such treatments
would be 
able to  save by buying a more streamlined plan.

Most Americans now get their  health care coverage through work. In
Texas, 
it's an estimated 52 percent, or  12 million people, according to the
state 
Department of  Insurance.

Lawrence Louie, a 40-year-old Plano telecommunications  worker, is one
of 
those. He doubts the McCain tax credit will be large enough  to buy
insurance on 
the open market for himself and his  wife.

"Basically, I would be forced to choose between paying the  increased
taxes 
[on the company-paid premium], or pay at least $4,000  out-of-pocket
per year 
for private insurance, after adjusting for the value of  the tax
credit," he 
said.

"Anyone with good insurance is not going to  find this acceptable."

THE PLANS

John  McCain: Proposes a $2,500 refundable tax credit for individuals,
$5,000 
for  families to make health insurance more affordable. In gaining the

credit,  workers would be taxed for the portion of their workplace
coverage 
insurance  paid by their employers. Would offer federal assistance for
states to 
create  high-risk pools that would contract with insurers to cover
consumers who 
have  been rejected on the open market.

Barack Obama: Would require coverage  for children but not adults.
Would 
require employers to provide insurance or  contribute to the cost but
would exempt 
the smallest businesses. Would offer  health plans similar to the one 
available to federal government employees. For  people who do not
qualify for 
Medicaid, he would offer a subsidy to buy into  the public plan or
purchase a private 
insurance plan. Would also expand the  children's health insurance
program.

SOURCES: Wire, Internet  reports






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