Senate Finance Committee Considering Changing Tax Treatment of Employer-Sponsored Health Insurance
The New York Times reports that as Congress weighed options to finance health insurance for tens of millions of Americans, lobbyists mobilized Wednesday to head off proposed taxes on employer-provided health benefits.
Labor unions began attacking a proposal by Senators Ron Wyden (D-OR) and Max Baucus (D-MT) to consider changes in the tax treatment of employer-sponsored insurance, the main source of health coverage for people under age 65. Health insurance and health benefits provided by employers to their employees are not counted as income and are not subject to income or payroll taxes. Sen. Baucus and many economists say the tax break is inequitable because its benefits go disproportionately to people with higher incomes. Sens. Baucus and Wyden have suggested that employer-provided health benefits above a certain value could be included in taxable income. Labor unions say their members sacrificed pay raises to get health benefits. Employers and employees assert that the proposed limits on tax-free health benefits would destabilize the current system of insurance provided through the workplace.
The federation of state and local employees denounced Sen. Wyden’s idea at a new Web site, stopwydenshealthtax.com, which asserts, “Under Wyden’s plan, we wouldn’t be able to keep the health care we have, even if we like it and fought hard to get it.” Josh R. Kardon, the chief of staff for Sen. Wyden, said: “Cadillac health plans should be treated as income, regardless of who is receiving them. The overwhelming majority of American workers should not be asked to subsidize Cadillac health packages through tax breaks, whether it’s for a wealthy chief executive or anyone else.”
The proposed tax is among two dozen options considered Wednesday by members of the Senate Finance Committee as they looked for ways to pay for coverage of the uninsured. Almost every option faces opposition from some quarters. The committee is also considering cutting special Medicare payments to teaching hospitals and requiring drug companies to provide bigger discounts to state Medicaid programs.
In addition, senior members of the committee, including Senator Charles E. Grassley (R-IA), said they intended to establish stringent new standards for nonprofit hospitals, which could require many of them to provide more charity care and more services to low-income people as a condition of keeping their tax-exempt status.
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