Will feds start taxing health benefits?
June 12, 2009 by Bill MeltzerPosted in: Health care, Latest News & Views
The Senate’s plan to reform the nation’s health system could include a tax on employer-provided health benefits.
The plans that would be affected would be those that exceed the value of the standard plan offered to federal employees (currently about $13,000 a year for a family of four). An employer-provided plan worth less than that level would remain tax-free, while any benefit exceeding the cap would be taxed as part of an employee’s compensation.
Such a tax, if adopted, would likely be phased in over the course of several years. A higher tax threshold and exemptions for unions would make the tax more politically viable but would diminish the amount of revenue it would raise to provide coverage for the uninsured.
Last month, a congressional committee discussed repealing the tax deduction allowed for certain large medical expenses or creating a tax on flexible savings accounts and health reimbursement accounts . A more dramatic proposal — taxing half of all employer-provided health premiums -was also discussed but is unlikely to get out of committee.
Meanwhile, President Obama has suggested a limit on the value of itemized tax deductions for families earning more than $250,000 a year.
Democrats in both the House and Senate have pushed for government-sponsored insurance for people who have trouble finding coverage through an employer or individually. The idea is adamantly opposed by most Republican legislators.
Tags: compensation, congress, health coverage, legislation, obama, taxes
June 19th, 2009 at 8:58 am
I don’t think taxing health cave coverage is a good idea at all! Health care costs are way too expensive as it is. It does not help anyone to raise the costs. Falsely inflating a price or cost by adding cahrges unrealted to the goods or services being purchased adds to the economic problems we are facing now. We are in a crisis and adding financial penalties to those who purchase health care coverage won’t make that crisis go away.
Also
Am I alone in thinking that it should not be an employer’s burden to provide health care insurance? I could understand an allowance given to employees and letting them purchase coverage for themselves if they want it. (Only employees electing the coverage would receive the allowance).
June 19th, 2009 at 10:49 am
What would be the benefit of a flex spending program if they begin to tax it? I do not understand why the government can not work under a budget. When a person’s home budget is cut due to loss of a job or other reason’s we can not raise taxes to help pay for our over spending, we need to make cuts!
I also feel the government places a large burden on employer’s to provide healthcare benefits. We offer them to retain our good employees and attract new talent, it is not required. If they begin to tax healthcare how can a company promote it as a benefit? Where will the incentive to offer healthcare go?
June 22nd, 2009 at 9:46 am
Why would congress want to have tax incentives (proposed changes) for indiviudals that have private health coverage, but not have tax free premiums for group plans. So than the healthy employees go to individual plans leaving the individuals with chronic conditions on the employer plan. The employer would than have to stop offering group health coverage avoid excessive cost. If indiviudal insurance will be pretax so should group health coverage. Than employees can choose between the two for best coverage. Why in the world would somone want to tax Flexible Spending Accounts? Isn’t that like kicking a dead horse. The Flexible Spending Accounts are designed to help offset the cost for people seeking medical services. Obviously those people have high expenses and need financial help. I thought the idea of the reform was to help people in need, not to take it way from them.
June 25th, 2009 at 2:46 pm
Very interesting… The idea of giving the employee fixed dollar amount to buy own insurance. Emp Grp coverage allows for employees to remain covered even when they are considered too high risk for coverage under pre-Medicare individual lines. So, if I were given a flat amount from my employer, I would not qualify for individual coverage nor would my spouse – our medical histories represent too much risk. Hmmm – that seems counterproductive. Perhaps the idea of employer recommended plans that would work under the same frame as current group plans as far as covering all employees without exceptions for pre-exiting conditions.
Taxing the benefits seems to treat the symptom not the source.
June 25th, 2009 at 2:51 pm
I’d be willing to bet that the Fed gov’t gets a far better rate for health insurance coverage than a company who employs only 10-500. If there is a tax, the value should be based on more realistic premium costs. As it is, between employee contribution, deductible and out-of-pocket costs, health insurance and medical care are still EXTREMELY expensive for anyone with a chronic condition; maybe our elected officials should be forced to pay what the average working person pays while on an average salary and no big perks. Oh, and while we’re at it, let’s eliminate their very cushy retirement and let them live on 401Ks and social security. Let’s just continue to penalize the average working person and their families…
June 25th, 2009 at 4:42 pm
This would be an added burden to already stretched incomes. This would affect employees with families and older employees, both are groups which would be burdened with this added cost, particularly at a time when employers are increasing deductibles and co-pays for cost savings in order to offer these benefits. Many employees are also being asked to take a wage reduction or at the least receiving no wage increases.
As stated in previous comments we are penalizing those individuals and families who are the backbone of our organizations.
June 26th, 2009 at 9:35 am
Employees (people) that work for small companies have a reason to hire on with a business that provides medical benefits, these are employees that make a normal weekly salary, and are struggling to make ends meet, but they are happy to have their family covered with insurance, and now the current adm, is going to tax them on the insurance payment received for a 10 thousand surgery as income, and then you pay more income and state tax, 50% tax to the irs is here, just tax and top of tax.
June 26th, 2009 at 11:06 am
What our politicians fail to understand is that the average employee (non-government employees) pay a good portion of the health insurance premiums already. (Just because an employer provides it, does not mean that the employer bears the full burden.) They also do not realize that the group health insurance rates small to medium sized employers receive from the insurance companies are much higher than the government group rates. Another point that they seem to have overlooked is that most plans today don’t have just simple co-pays, the covered individual also needs to pay deductibles, as well as coinsurance even in HMO’s. People who have coverage pay a lot to have it. Now they are contemplating taxing the benefits?
Sooner or later the well will run dry and more people will join the ranks of the uninsured. Which in turn increases the number of people looking for government assistance for health insurance….
August 28th, 2009 at 2:28 pm
Wouldn’t it be interesting if those making the rules also had to live by them? Are members of Congress going to be changing to a similar plan as us? How can they make all these decisions when they do not affect them at all ????