Taxes On Health Insurance

[MissScripture]

On Monday we're having a discussion on healthcare/insurance reform. Most of the questions I've heard hashed and rehashed repeatedly. This one I haven't really heard discussed.

Paying taxes on health care insurance-no longer allowing the flex plan. Would this be a good way to partially pay for health care for everyone?


I feel like it doesn't seem like the brightest idea, but I can't exactly verablize why. Probably because I am kind of against adding taxes to things. What do other people think?

[Winchester]

The government needs to get the floopy out of the way.

[strgzr00]

[quote name='MissScripture' timestamp='1284256260' post='2172114']
On Monday we're having a discussion on healthcare/insurance reform. Most of the questions I've heard hashed and rehashed repeatedly. This one I haven't really heard discussed.

Paying taxes on health care insurance-no longer allowing the flex plan. Would this be a good way to partially pay for health care for everyone?


I feel like it doesn't seem like the brightest idea, but I can't exactly verablize why. Probably because I am kind of against adding taxes to things. What do other people think?
[/quote]

For the Medicare folks, I believe that they should pay taxes on the benefits they receive over and above the premiums, which don't begin to cover the value of what they receive. Medicare folks have an unbelievable deal--they pay very reasonable premiums on an insurance that would be unobtainable if they were trying to get it commercially. This is true, even factoring in what they have already paid towards Medicare. That added value should be--taxable. Otherwise you're getting two things free--all that very low-cost insurance and the non-taxed value of that insurance.

The taxation could be on a sliding scale, and begin well above the poverty level. For folks with income above a certain level, their Medicare insurance value could be taxed at a certain rate. Before we became eligible for Medicare, my husband and I had a 3 mo period where we would be uninsured--we thought. I tried getting BC/BS insurance for that period, No dice. We were turned down flat--including my husband with NO medical history. We finally bought a very expensive short-term policy, and then got covered through his federal retirement benefit--and then Medicare kicked in. Now we have BC/BS insurance partially paid for by the US government (federal employee plan) AND Medicare, all very reasonable. Unbelievable benefits which have paid for FIVE joint replacements and a pacemaker!! --NO wonder Medicare is going broke!--We could easily afford to pay the tax on that valuable insurance and many other folks could, too--and should, I believe.

[dairygirl4u2c]

not about taxes per say, this post... but.

if the government got the floopy out of the way, it'd allow competition between states. as exists now, each state regulates its own health insurance. once states competed, it'd probably cause a race to the bottom, which would be good to lower costs, until it started letting companies start taking advantage of everyone. that's why the federal government would do better, or at least could, if it did it minimally, and right. a class prevention of 'race to the bottom', by involving the federal government. we can't let people look at their own contracts.... no one looks at those, and no one knows what should go into a contract- we need regulations. unless you want a lawyer everytime you get health insurance? it's just such a huge problem, that toi ask for individual responsibility here is silly.

great link on the discussion of 'race to the bottom' and health care
http://www.professorbainbridge.com/professorbainbridgecom/2010/02/competitive-federalism-and-health-insurance-a-comment-on-ezra-klein.html

my prediction as of now is that mitt romney will make republican contender, if he doesn't come off as too stiff etc. and then at essense of the debate, will be weather this should be a state or federal issue, along with maybe a few other minor issues. (can romney distance himself from the mandate of requiring insurance,given his own state had one? was he for it? can he prove it? that sort of stuff

---------

and for the record, the current bill does open up competition between the states.
the current bill also puts a limit on the amount companies can charge, which i assume has more to do with the fact that they'd start charging a heck of a lot if they could given the government mgiht start increasing demand a lot. it's an interesting question if the increased demand, or race to the bottom will prevail, on balance.

i hope nonprofits start geting involved a lot. that's how a lot of countries do it, with government involvement, mind you. but if we can do it nonprofit without govenment, we'd be the better for it. (we'd also be the better for it, if we cut out the middle man and just paid doctors directly, etc. there's lots that this bill could and should be doing.

Edited September 12, 2010 by dairygirl4u2c

[Norseman82]

I don't think that flex-plus plans are going away, but I do know that you can't use it to get over-the-counter allergy medication like Actifed after December 31, 2010. I think that if companies have their benefits meetings before the November elections, the backlash against Obamacare will be even greater.

Personally, if the thought is that by increasing your deductible and paying more out-of-pocket we will decrease insurance costs, discouraging flex-plus plans is only counter-productive. In fact, I think that we should expand it and allow for some rollover of funds from one year to the next (since people with unused funds tend to try to find things to spend it on at year-end, like stocking up on allergy medication).

[LouisvilleFan]

I work for a health insurance company and can't say I know what a flex plan is... if you mean a high deductible health plan, don't expect those to go away. The old model of health insurance where you got a free ride off your employer doesn't work anymore.

Healthcare insurance is a complex issue, not least of us because our bodies are so complex. Think about how expensive it is to maintain and repair an automobile, yet our bodies are many times more complex than any vehicle. That's why doctors go to school for twelve years. Even then, many infections and diseases are notoriously difficult to diagnose even with the PhD. Plus, this is human life we're talking about: economically speaking, how do you price the treatment of priceless lives? Does anyone want to argue that $500,000 is too much to cure a person of cancer? Maybe it is, but even if all the inefficiencies were eliminated, still the only two entities who could pay for cancer treatment are insurance companies and the government.

Second, Medicare is a good thing for the most part. As a society, we should take care of our elderly and share the cost. Measures are needed to keep that cost in check, but no matter how well you do that job, it won't change the fact that healthcare for retired people is ridiculously expensive. The key to funding that cost is higher fertility rates: we need more than three workers paying for each Medicare recipient.

[Winchester]

[quote name='LouisvilleFan' timestamp='1284351935' post='2172542']
we need more than three workers paying for each Medicare recipient.
[/quote]
The problem with socialism is eventually you run out of other people's money.

[Norseman82]

[quote name='LouisvilleFan' timestamp='1284351935' post='2172542']
I work for a health insurance company and can't say I know what a flex plan is... if you mean a high deductible health plan, don't expect those to go away. The old model of health insurance where you got a free ride off your employer doesn't work anymore.

Healthcare insurance is a complex issue, not least of us because our bodies are so complex. Think about how expensive it is to maintain and repair an automobile, yet our bodies are many times more complex than any vehicle. That's why doctors go to school for twelve years. Even then, many infections and diseases are notoriously difficult to diagnose even with the PhD. Plus, this is human life we're talking about: economically speaking, how do you price the treatment of priceless lives? Does anyone want to argue that $500,000 is too much to cure a person of cancer? Maybe it is, but even if all the inefficiencies were eliminated, still the only two entities who could pay for cancer treatment are insurance companies and the government.

Second, Medicare is a good thing for the most part. As a society, we should take care of our elderly and share the cost. Measures are needed to keep that cost in check, but no matter how well you do that job, it won't change the fact that healthcare for retired people is ridiculously expensive. The key to funding that cost is higher fertility rates: we need more than three workers paying for each Medicare recipient.
[/quote]

A "flex plan" is basically pre-tax dollars that you set aside to pay medical expenses not covered by insurance, like deductibles and co-pays and many over-the-counter medications (like Actifed). Example: if you are in the 28% tax bracket, if you contribute $100 to a "flex plan", you can use that $100 for medical expenses; if you did not have a "flex plan" for medical expenses, that same $100 would be taxed and you would only have $72 left over for medical expenses. The downside is that the money in the "flex plan" does not carry over to the next year, so one has to carefully project what their medical expenses are expected to be (which may be easy if your wife is expecting a child in the next year of if you can postpone a root canal until after January 1 or if you are planning on new eyeglasses) and estimate conservatively. Otherwise, you may find that in order to not lose your contributions to the "flex plan" you will be spending December stocking up on allergy medications, etc.

[LouisvilleFan]

[quote name='Norseman82' timestamp='1284518641' post='2173318']
A "flex plan" is basically pre-tax dollars that you set aside to pay medical expenses not covered by insurance, like deductibles and co-pays and many over-the-counter medications (like Actifed). Example: if you are in the 28% tax bracket, if you contribute $100 to a "flex plan", you can use that $100 for medical expenses; if you did not have a "flex plan" for medical expenses, that same $100 would be taxed and you would only have $72 left over for medical expenses. The downside is that the money in the "flex plan" does not carry over to the next year, so one has to carefully project what their medical expenses are expected to be (which may be easy if your wife is expecting a child in the next year of if you can postpone a root canal until after January 1 or if you are planning on new eyeglasses) and estimate conservatively. Otherwise, you may find that in order to not lose your contributions to the "flex plan" you will be spending December stocking up on allergy medications, etc.
[/quote]

Ah... we used to have those a couple years ago. Had to google it, but the official term is Flexible Spending Account. The advantage to them is the full year's contributions are accessible up front, so you could spend all of it in January even though the final dollar won't be contributed until December.

I use a Health Savings Account. You can only spend what's actually contributed, but it is tax-free and held in your name, so it goes with you from one year to the next and isn't affect by your employment situation. In theory, combining an HSA with a balance high enough to satisfy the deductible on a High Deductible Health Plan would eliminate virtually all out-of-pocket healthcare expenses. It doesn't work quite that well in practice, but I find it to be a pretty good situation considering the alternatives.