Health-Insurer Tax Gets ‘Intense Look’ in Senate, Lawmakers Say

[ProSense]

Health-Insurer Tax Gets ‘Intense Look’ in Senate, Lawmakers Say

By Heidi Przybyla

July 24 (Bloomberg) -- Lawmakers seeking a bipartisan compromise on financing President Barack Obama’s $1 trillion health-care plan are focusing on a proposal to tax insurance companies on their most expensive health-care plans.

The plan, offered by Democratic Senator John Kerry of Massachusetts, would impose an excise tax on insurers that could generate tens of billions of dollars. Making the companies pay may help break a deadlock in Congress over funding. Obama opposes taxing health benefits for middle-class Americans and many Republicans and Democrats have said they won’t accept a plan to tax the policies of the wealthiest.

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“That may be a practical option,” Snowe said yesterday, “as a way of attacking future costs in health care and driving them down and creating disincentives for the most expensive policies.” Earlier this week, Senator Kent Conrad, a North Dakota Democrat on the Finance Committee, said the idea is under consideration by the panel.

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“It might be a way of accomplishing our goals,” Kerry said.

Grassley agreed. The proposal, he said, has “been a subject of discussion for two days of the last four or five” in the committee.

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The tax may affect insurance companies such as Minnetonka, Minnesota-based UnitedHealth Group Inc., Indianapolis-based WellPoint Inc., Hartford, Connecticut-based Aetna Inc. and Louisville, Kentucky-based Humana Inc. The insurance industry is already poised to try to block it.

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[ProSense]

1. No comment? n/t

[flpoljunkie]

2. I find it hard to believe Congress would have the cajones to vote to tax insurance companies.

But, how surprising and totally refreshing it would be if they did!

[yodermon]

3. Tax the Immoral Profits of Health Insurance Co's to fund Public Health Insurance??

sounds good.

[Orsino]

4. I don't have my code book. Is that like a sultry glance, or a nod and wink? n/t

[Engineer4Obama]

5. I prefer the House's version

The tax hike on the wealthy Americans. They survived Eisenhower's 90% rates they should be able to survive a 40-44% marginal rate.

[ProSense]

6. I actually prefer taxing the insurance companies.

Taxing the wealthy will do nothing to curb insurance company massive profits or control costs.

[Engineer4Obama]

7. Well I'm of the belief that the wealthy in this country need a tax increase in general

Ideally I'd prefer to see such an increase go towards a down payment on our national debt. However in this case I just can't see a good way to prevent the insurers from passing that tax increase onto the consumer. After all who's gonna stop them? The only people they seem to care about is their share holders(but that's another battle for another day).

[ProSense]

9. I don't disagree. but

this is about health care and the insurance companies' greed is the primary reason the system is broken.

"I just can't see a good way to prevent the insurers from passing that tax increase onto the consumer."

They'll be paying a tax on anything above an established cost. What will they do: short change on benefits? I don't see how they can. That's why people will have a choice, specifically a public option. Maybe that's why they believe the public option will push them out of business (likely a voluntary action because they will no longer be able to make the kind of profits they accustomed to making).

Boo hoo!

[karynnj]

10. Only plans that cost more than averag in your region of the country are taxed

and they are only taxed on the portion above the average cost. So, if you have a $20,000 plan and the average is $15000 - your insurer will be taxed on $5000. I assume they will eat some of the tax sold to companies because otherwise it increases the difference in cost compared to an average plan.

Consider that the reason the government originally decided not to tax this benefit as income, was they wanted to encourage companies to do it. Assume back in say the 1960s, that their managers had income sufficiently high to reach the 40% marginal tax bracket. Now consider their health insurance premium added on top of their income. Assume the policy cost $1000 and these employees made $10,000 - a fantastic salary then.

If they gave the employees the $1000 and let them buy it or if it was taxable income - they would pay $400 in taxes. To give the employee the insurance keeping his after tax income the same as before he So, this lets the company give them was given this, the company would need to give him $1666.66 (or the insurance and an additional $666.66 to pay the taxes on it. For companies this meant they could give a benefit worth more to their employee than it cost them.

You could argue that if the excise tax is lower or equal to the highest marginal rate a person pays, even if all of it is pushed to the individual, all it is doing is saying that the US will make the portion of insurance premiums above the average regional premium no longer tax free.

[karynnj]

8. Not to mention that part of the reason for this proposal is that

as one of the articles in the op said, too many Senators were against the idea of funding by a tax on the wealthy. This actually will end up as a tax on the better off - as they are the ones with the higher policies. At least part of the tax will be pushed forward to whomever is paying the premiums - the insured or their employer.

Remember that Kerry in 2004 spoke of funding it partially by rolling back the tax cuts on the top 2%. This is clearly another plan, offered when the first was blocked.

[Thothmes]

11. Whom do you think will really wind up paying that tax in the form

of higher premiums?

[ProSense]

12. Please read

the other comments (8, 9, and 10).

[Thothmes]

13. You have a lot of confidence in the ability of our tax committees

to write tax legislation that is free of loopholes, god we missed that aspect, and poorly defined terms and phases. Bet the tax attornyes for the big insurance companies are a hell of a lot smarter than the folks who draft the tax legislation. I still maintain any tax collected will eventually be paid by the folks payin the premiums.

[ProSense]

14. Oh quit the nonsense.

Loopholes? Explain what they're going to do and what would stop it from driving more people to the public option?

"I still maintain any tax collected will eventually be paid by the folks payin the premiums."

That makes no sense since the insurance companies will be taxed on excesssive premiums.

It's either they're going to cut benefits, but, again, explain why this would not drive people to choose another plan: the public option?

[Thothmes]

15. Has the legislation passed yet.

until it is on paper, signed by the President and enacted, any suppositions on how fair or how well it will work is purely specutlation on your part.
I am free to speculate that in any complex legislation, which national health care will be, there will be a lot of unintended consequences. Some will be realitvly harmless, some may have a very serious impact on those that least expect it. An example of unintended consequences is the alternative minimum tax. Great legislation when written, but flawed and never adequately corrected. I can easily see portions of the health care finance going that route. Maybe I am overly pessisimistic but our government has a long track record of screwing the pooch with poorly constructed legislation..

[ProSense]

16. "I am free to speculate that...there will be a lot of unintended consequences."

Yes, you're free to speculate. Everyone is doing it and will continue doing it regardless of the proposal, but speculation isn't fact.

[Thothmes]

17. Thats right it is not fact

Neither is the proposed tax on excessive premiums.

[ProSense]

18. What?

It's a fact that the tax on excessive premiums had been proposed.

[Colobo]

19. I think this might be a good choice.

[ProSense]

20. Agree. n/t