Obama considering tax on employee health benefits

MedSave Admin | March 18, 2009

The New York Times reports that Obama administration is considering taxing employee health benefits as a way to help pay for health care reform. Obana denounced the idea of taxing employee health benefits on the campaign trail as "the largest middle-class tax increase in history," but now President Obama is now saying that he would consider the proposal.

If passed, this tax would have two primary effects. First, it would accelerate the wealth transfer trend trend by having those with employer-sponsored health coverage to pay for those without coverage. Sencondly, it would tip the balance in the health insurance market in favor of the trimmed down mini-med plans and other less expensive individual health insurance as opposed to the more expensive full coverage health insurance plans typically provided through employers.

A spokesman for MedSave.com, a company that handles enrollments in this type of low cost individual health insurance, comments on the irony that this measure would promote the Republican platform of replacing employer-provided coverage with portable individual insurance plans. "It would be great for our business" says Tony Novak, principal of MedSave.com, "but a bad move for the country". MedSave.com endorses making all health insurance tax-deductible and all health benefits tax-free as a logical approach to increasing the overall level of health coverage in our country. "You don't increase taxes on behavior that you want to encourage" continues Novak, "The tax system has always been effective in molding financial behavior, but this is just backwards in terms of our country's stated goals". The long term trend shows about a 1% decline in the number of people covered by employer-sponsored health plans each year and an added tax would likely accelerate the trend. Meanwhile. the number of individually purchased health insurance plans, including supplemental coverage and short term health insurance, has increased in recent years.

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