Bush to float health insurance tax break

yahoo (via AP) ^ | 1/20/2007 | DEB RIECHMANN

[PtrainerNYC]

WASHINGTON - President Bush will propose in his State of the Union address a tax break for people who buy their own health insurance and a limit on how much coverage individuals can receive tax free at work. ADVERTISEMENT

The proposal to be announced Tuesday offers a tax deduction to people who purchase coverage and urges those with generous plans to either embrace cheaper insurance or pay taxes on part of it, according to a Bush administration official familiar with the proposals.

If passed by Congress, the plan would be the first time that workers could get a tax break for buying their own insurance. At the same time, it would be the first time that some employer-provided health care benefits could be taxed.

[Hendrix]

There's a vote loser. Recalls the phrase: "We are going to take things away from you for the common good."

Bush is not going to take it away. He is just going to discourage too much FREE insurance coverage by not allowing it to go untaxed. If your employer wants to give too much coverage, it would still be able to do so but it will be taxed. The end result is that insurance coverage must only cover big things, not every cold, etc. or people will use too much of it when it is free and that causes the price of health care coverage to go up. Again, too much free insurance coverage (from employers and the government) has caused the high health care costs in this country.

[what's up]

He's certainly acting like a Socialist tax raiser.

No, a socialist would invent a government health care program a la Hillary.

Pres. Bush is trying here to turn health care over to the free market. Far from socialism.

[Hendrix]

"That was once true, but I don't think it is anymore."

True. That is old law.

[sitetest]

Dear Owen,

"Group plans do NOT exclude pre-existing conditions."

I think that varies from state to state and plan to plan, as well as, on the size of the plan.

My small business buys small group health insurance. Because we're in Maryland, the insurance company may not exclude pre-existing conditions. Also, we have community rating in Maryland, so we can't be charged more for a relatively sicker small group.

However, over the river in Virginia, I believe that for small groups, they can exclude pre-existing conditions, subject to the conditions of federal law (which, I believe, generally prevent pre-existing exclusions for folks who have been continuously insured for some length of time). As well, in Virginia, small groups can be rated for the health of the group. Thus, one person with a serious illness can cause significantly higher premiums for the group.

"Early retirees face risks to their life savings by not being able to get insurance."

For folks who have been continuously covered by health insurance, I'm pretty sure that HIPAA mandates that pre-existing condition exclusions will be reduced, even to nothing.

Thus, if someone retires from a company where they were continuously covered by health insurance for years, if they're no longer eligible for any sort of group insurance, and they arrange for individual health insurance to pick up continuously, or nearly so, from the end of their former employer's group coverage, their new insurance policy must cover pre-existing conditions from the start.

The real difficulty is in the cost of individual health insurance, especially as folks age.

In the state of Maryland good coverage for a family with a middle-aged head of household is easily over $1,000 per month.

Ouch.


sitetest

[plain talk]

Basically if you dont have health insurance you get a tax break

Where did you see that? It says the tax break is for those who buy their own health insurance.

[XRdsRev]

I work for the Federal government and I get no healthcare coverage, nor am I allowed to buy into the Federal plan.

The only Federal health coverage I have is if I am injured on the job.

[Hendrix]

"Pres. Bush is trying here to turn health care over to the free market. Far from socialism."

In our market system, people make their purchase decisions (how much to buy) based on the cost of the item being purchased.

However, our government, though tax laws, set up a system where people health care for free without having to make any decision on the cost of using it. That leads to people using too much healthcare, which drives up the cost of health care. Our free market is not working correctly with health care because government tax laws (and state laws which set minimum insurance standards that are way too high) have taken the price decision from the user of health care. When people have to make a decision about whether to go to the doctor (for smaller things) because of cost, our system will start working properly again and health care costs will go down because people will stop wasting it and using too much of it.

[sitetest]

Dear XRdsRev,

Do you work for, or are you a federal contractor?

Or are you in one of those "temporary" jobs that don't come with benefits?


sitetest

[XRdsRev]

I am in a "temporary" job 42+ hours per week, 52 weeks a year. My position is expected to last for 7-8 years. No health care, no vacation, no pension, no sick days...nothing.

That having been said. Seriously, I am proud to be working for the agency I am employed with. I am proud of my job and the work we are doing for the country.

[King Moonracer]

our system will start working properly again and health care costs will go down because people will stop wasting it and using too much of it.

Kind of like how when people conserve electricity, the electric companies raise rates to maintain profits.

[flynmudd]

The Sub-S stuff was new for 2006. My boss was pissed. The $10K that we paid in premiums was taxable this year. Not FICA taxable, just federal and state.

[sitetest]

Dear XRdsRev,

"I am in a 'temporary' job 42+ hours per week, 52 weeks a year. My position is expected to last for 7-8 years. No health care, no vacation, no pension, no sick days...nothing."

Having lived here since 1966 (when my father took a government job), and having done federal contracting for most of the last 15 years, I've only known two other folks with one of those "temporary" positions.

It seems to me that the trend for the government is to outsource that kind of thing. Makes it easy to get rid of folks they don't like.


sitetest

[XRdsRev]

Technically I am an intermittant Federal employee but I am one of those who fall into the position of working a regular full time position while being officially categorized as intermittant.

Not getting paid benefits is something I understand, I knew that when I signed on. Not being able to buy into the Federal plan with my own money is something that really stinks though.

[sitetest]

Dear flynmudd,

Really??

Hmmm...

I just checked the IRS rules for 2006, and here's a quote:

---

Health Insurance Costs for Self-Employed Persons
If you were self-employed and had a net profit for the year, were a general partner (or a limited partner receiving guaranteed payments), or received wages from an S corporation in which you were a more than 2% shareholder (who is treated as a partner), you may be able to deduct, as an adjustment to income, all of the amount paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, and dependents.

The insurance plan must be established under your trade or business, and you cannot take this deduction to the extent that the amount of the deduction is more than your earned income from that trade or business.

You cannot take this deduction for any month in which you were eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer. This rule is applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance.

If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. But if any of the following applies, do not use the worksheet.

You had more than one source of income subject to self-employment tax.

You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.

You are using amounts paid for qualified long-term care insurance to figure the deduction.

If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction.

http://www.irs.gov/publications/p502/ar02.html#d0e4314

---

I'll have to check with my accountant.


sitetest

[XRdsRev]

Actually the segment of the Federal government that I work for categorizes 2/3rds of its force as "intermittant", thus they get no benefits, vacation etc. Of the thousands of people in this group, a significant number actually are intermittent (they don't work full time, year round) but hundreds if not thousands more, do perform full time.

Many are covered by the VA or various other government plans, some others are on their spouse's insurance. Unfortunately none of those options work for me and as it is right now, there is no way I as a single unaffiliated individual, can afford to buy health insurance.

A health insurance tax break would really help a guy like me.

[Hendrix]

"Kind of like how when people conserve electricity, the electric companies raise rates to maintain profits."

Electric companies are mostly monopolies, and thus they are not subject to our free market system. Entities that are not monopolies (health care) cannot raise prices because of competition in our system (they would lose market share to the other competitors).

Learn some basic economics and it will take you a long way to understanding all of this. Unfortunately, most people don't have a clue about how our free market system works or basic economics.

[Hendrix]

"A health insurance tax break would really help a guy like me."

It makes no sense that people who work for companies who provide heath insurance to their employees get tax free insurance, yet people who have to pay for it themselves have to pay for it with taxed dollars.

Our government has screwed this up with tax laws. If it were totally left to our free market system, we would not have a health care problem.

[Owen]

Okay, look folks. Look at this thread. Everyone has had to go out and do major contortions to find their own solutions to their own individual problems -- and many replies say that only recently did they discover solutions.

The pre ex issue remains enormous. Oh, and the person to went from BCBS in one place to another . . . NO . . . that did not solve your problem. The new locale BCBS does have to take you, but they don't have to take you at the original price. They will jack your premium.

Pre ex in effect prevents you from relocating. Yes, a lot of this is state to state -- but look at this thread. Look at the contortions to find a solution -- and the solution you find will jack its prices double digit % per year.

Bush is stepping out and raising the issue. The GOP HAS TO HAVE A VOTE WINNING POSITION ON THIS BECAUSE IT WILL BE AN ENORMOUS 2008 ISSUE.

My suggestion is a federal mandate that all individual policies are, in total, a group. They get group rates and no pre ex exclusions. The insurance industry would be hit by this. The answer is a tax cut for that industry to compensate. This looks to me to be a solid tax-cutting conservative approach.

[sitetest]

Dear Owen,

"My suggestion is a federal mandate that all individual policies are, in total, a group. They get group rates and no pre ex exclusions."

The difficulty here is that many folks would sensibly refrain from buying health insurance until some major illness arose.

Without the ability to exclude pre-existing conditions, or to require continuous coverage in lieu of the exclusion, health insurance companies would receive individual policy premiums primarily from sick people, and not from well people.

Insurance doesn't work so well under those circumstances.

Your idea only works if there is an individual mandate requiring every adult to obtain health insurance. This hasn't usually gone over well with some segments of the Republican coalition.


sitetest

[Owen]

>>
The difficulty here is that many folks would sensibly refrain from buying health insurance until some major illness arose.
>>

I think I disagree with this, and this is the focus of your objection. Group plans for employers cover everyone. Individual policies would be bought by those who choose to buy them. Yes, maybe this hurts the insurance industry, but that's what the industry targetted tax cut is for.

I am not invested in my own suggestion. My only focus here is to get the GOP recalibrated. Health Insurance used to be something that was not a conservative issue. It has to become a conservative issue NOW or we will lose 2008. I think it may be the #1 issue of 2008.