Some Senators Fear New Tax Meant To Control Health Costs Could Spiral

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A tax on generous health benefits in the health reform plan unveiled this week by Sen. Max Baucus, D-Mont., has raised eyebrows around Congress, the New York Times reports. The tax would apply to any plan with annual premiums in excess of $8,000 for individuals and $21,000 for families, and would initially impact only a small number of health plans, according to the Senator's own estimate. The tax would raise $215 billion a year and be levied directly on insurance companies. Some senators said it was problematic because the tax would simply be passed on to the middle class.

"But other senators said they feared that the insurance tax, like the Alternative Minimum Tax on personal income, would affect more and more people over time. The threshold amounts would rise with the Consumer Price Index, which is increasing more slowly than the costs of health care and health insurance." Sen. John Kerry, D-Mass., first proposed this type of tax, but said the income levels were set too low, threatening to raise costs in the future on too many people. He proposed a $24,000 threshold.

By contrast, Sen. Kent Conrad, D-N.D., "defended the proposal. By reducing the current tax subsidy for employer-provided health benefits, he said, the proposed tax would slow the growth of health spending. Under current law, employee health benefits are not counted as taxable income for workers" (Pear and Herszenhorn, 9/17).

This information was reprinted from kaiserhealthnews.org with kind permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery at kaiserhealthnews.org.

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