As the details of health care reform legislation solidify, a hotly contested topic –- taxes on employer-sponsored benefits -– has come under fire, even from within the Democratic Party.
Several Democratic senators recently spoke out against a tax on employee health insurance benefits that would help foot the bill for health care reform, which has been estimated to reach $1 trillion over 10 years.
Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, is pushing the idea of a benefits tax as a way to pay for reform while controlling future costs. Some Republicans have warmed to the idea as well, but it has been strongly opposed by labor unions.
"It's clearly a very difficult issue. ... You go to the public to ask them what they think and they don't like it," said Sen. Kent Conrad (D-N.D.). Many Democratic senators expressed concern that such a measure would cost more votes from their own party than they would gain from the Republicans, according to a report from the Associated Press.
A compilation of four recent polls revealed that at least 59 percent of the public opposes taxes on health care benefits to pay for reform. Conrad said legislators are “looking at other options” to help pay for the proposed plans.
After a recent bipartisan meeting, a top Republican said it would be tough to pass any health care reform without some sort of benefits tax.
"The extent to which that's not on the table, it leaves a great big hole in what we're trying to do, and to fill that hole is very, very difficult," said Sen. Chuck Grassley (R-Iowa).
The concept of an employer mandate also has moved to the forefront of the health care debate. Earlier this month, senators released a new draft bill that would require employers to pay 60 percent of the cost of insurance for workers or pay an “annual fee” of $750 per full-time employee. Businesses with fewer than 25 employees would be exempt from the requirement and would receive a subsidy to encourage them to offer benefits.
Separately, a House proposal released in June would call for employers to pay 72.5 percent of the premium for an individual employee (65 percent for family coverage). Failing to do so would cost companies a penalty equal to 8 percent of pay for each worker who was not offered coverage. Small firms, which the draft did not define, would be exempt.
Many employer groups oppose a mandate and a government-run public option because they fear an exodus of healthy employees to a cheap government plan, leaving required employer plans saddled with higher medical costs.
Senators have attempted to address this concern by proposing to prohibit employees from jumping from their employer’s plan to a government-run public option unless premiums were deemed “unaffordable.”
~July 2009 HRinsider Bulletin
