Monday, July 13, 2009

Wyden-ing Options

A while back, we were privileged to participate in a "blogger call" with Sen Ron Wyden. While I have some issues with many of Sen Wyden's proposals, I certainly appreciated his willingness to reach out to "new media" to help get his message out. As a result of that teleconference, we're treated to regular email updates from the Senator's office. One such recently hit our in-box, and it's quite intriguing. Basically, the Senator proposes to do away with the current employer exclusion for health insurance premiums, and replace it with a tax deduction for everyone who pays for health insurance (and, of course, pays taxes).
The plan would delete the exclusion employers currently enjoy, which makes health insurance more affordable for a lot of folks. And, of course, it helps businesses attract and retain employees. On the other hand, most folks who buy their own health insurance enjoy no such benefit, and must pay for that coverage with after-tax dollars, adding to the net cost. Sen Wyden would grant these individuals (as well as employees covered by insurance at work), a tax deduction for premiums paid, up to about $17,000 per family (or about $7,000 for individuals). This number is partially arbitrary; it's based on the "value" of the Federal Employees' Health Plan, plus an additional 10%. This method is very different from Sen Baucus' proposal, which simply caps the employer exclusion at that magical $17k, with no regard to individuals who buy their own coverage.
Needless to say, I have some issues with the totality of Sen Wyden's idea, but the basic premise is sound: why shouldn't individuals get the same tax benefits as employers? This seems fundamentally unfair and unsustainable. By extending those tax benefits to individuals, their net cost for health insurance decreases, making it more likely that they'll actually buy coverage. And I have no problem in principle with the idea of a cap: this may encouage folks to look for more effective coverage (e.g. HSA's) and to stop wasting money. I do have some problems with the actual numbers: while a $1400 ($17k divided by 12) a month premium certainly seems excessive, there are factors that go into the mix over which an individual (or family) have no control: where one lives, significant health problems, family size - all of these can affect one's premium. I'm not sure how to control for these, but they do need to be addressed.
The biggest problem I have with this proposal is the call for a so-called "individual mandate;" that is, requiring everyone to buy insurance. Yes, I think it's reckless to go "naked," but whatever happened to liberals' much vaunted "freedom of choice?" Aren't we supposed to be free to make (potentially stupid) decisions on our own? And, of course, that mandate implies other mechanisms: if one is required to buy insurance, it certainly follows that the market will be forced to offer it to them. And that, of course, sets up a whole 'nother set of issues.
There are those who will claim - perhaps correctly - that this will be the death knell for employer based (aka "group") insurance. To which I reply: "you say that like it's a bad thing." Employers don't make your mortgage or car payments, or pay your grocery bill. Why should the purchase of health insurance be any different? Of course, there are other advantages to group cover (e.g. guaranteed issue), but these are also what make that coverage so expensive. By extending the tax benefits to those without group options, we make the whole system less expensive, which seems to me a pretty good deal.
blog comments powered by Disqus