If we posit that an "overhaul" of how we deliver and pay for health care is going to cost some major moola (and it will), then the question "from whence will it come" becomes terribly important. As we recently noted, one proposal puts the onus on providers, in an effort (however misguided) to put the brakes on the cost of delivering health care.
Now comes word that part of how we'll pay for that care is going to come from increased taxes on life insurers [ed: But of course!]. According to Morningstar (a financial news service), "The budget also seeks to take away some tax breaks for the life insurance industry, raising $12.7 billion over 10 years, according to the White House estimate." Recently, of course, most WH "estimates" have turned out to be "epic fails." This one strikes me as following in that vein.
The Morningstar piece reports that carriers use "special rules when determining how much to deduct for dividends received on investments in common stock. The White House is proposing to further restrict those deductions." So restricting deductions is supposed to generate income? Ooookay. The reality, of course, is that the affected carriers' increased cost of doing business will simply be passed along to the consumer. Great idea in a tanking economy.
The article goes on to say that the O-Man is looking to do away with "some interest expense related to life insurance [that] companies take out on "key personnel," which under current rules may be deducted." It's not clear where that comes from: so-called "key man policies" aren't generally deductible, and we've already witnessed the demise of COLI.
In a move that could appeal only to uber-wonks, the administration is also targeting "the pro-rata interest expense disallowance rule for contracts covering a business’s employees, officers or directors." [ed: Are there closed captions for any of this?] Apparently, the idea is to stop certain businesses from deducting what had been deductible interest expenses based on the value of life insurance policies. The O-man "estimates" that this will generate an additional $8 billion or so over the next 10 years. Sure.
Here's the thing: for most people, the nature of these proposals might seem, well, unimportant. But they'll have a very real impact on the cost of insurance, and on most other industries' bottom lines and, hence, our pocketbooks.
[Hat Tip: FoIB Jeff Milne]
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