About that McCain Healthcare Plan

[Puppycow]

I guess that health care plan of McCain's isn't so great.

Wow:

CNN Money: Election: Your health insurance at stake -- Younger, healthier workers likely wouldn't abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain's senior economic policy adviser. "Why would they leave?" said Holtz-Eakin. "What they are getting from their employer is way better than what they could get with the credit."
In addition to harshing on their own brilliant "you get to choose your own!" health care plan, there is a bigger gaffe hidden in DHE's statement. The problem, of course, isn't that employees would "leave," it's that employers would. Flashback:

Only about 60% of employers provide health care coverage. McCain's program removes the incentive for employers to provide it so I expect a lot of them will stop providing it. More Americans will be on their own, those with preexisting conditions will not get insurance. And it provides no incentive for employers to start covering employees. For small businesses, the situation is worse - only about 45% provide health benefits.

 

[Ausmerican]

You know Puppycow I was saying to my wife the other day that you have to give McCain a lot of credit.
Considering his advanced age and the injuries that still obviously plague him, still being agile enough to get one foot in your mouth while shooting yourself in the other foot is really, really impressive.

 

[boooeee]

Are there other sources for the idea that McCain's plan would lead to employers dropping health coverage? The source for this is the blogger's dad (who does happen to be a credentialed actuary).

I understand that the employee would now be taxed on their health benefits, but to the employer, it is financially neutral. They already deduct the cost of health insurance as a business expense (just like normal payroll), and would continue to do so under McCain's plan.

 

[Puppycow]

Are there other sources for the idea that McCain's plan would lead to employers dropping health coverage? The source for this is the blogger's dad (who does happen to be a credentialed actuary).

I understand that the employee would now be taxed on their health benefits, but to the employer, it is financially neutral. They already deduct the cost of health insurance as a business expense (just like normal payroll), and would continue to do so under McCain's plan.

Did you read the CNN link?

McCain's tax proposal

Under McCain's plan, employees would get taxed on the value of their health insurance, which on average costs $12,680 per year for a family, according to the Kaiser Family Foundation. Workers pay an average of $3,354 in premiums, while their employers cover the rest.

Most employees have their premiums deducted from their paychecks without paying tax on them. So, if you make $50,000, you are likely paying tax on only $46,646 of income.

Under McCain, your taxable income would rise to $59,326. If you were in the 25% tax bracket, it would mean an additional $3,170 in taxes.

But this increase would be knocked back by the $5,000 tax credit. So in the end, you'd actually have $1,830 to put in a health savings account, which could be used to cover premiums and other medical expenses.

Experts, however, fear that eliminating the tax advantage of employer-based coverage would prompt younger, healthier workers to leave their office plans. If that happened, costs for the remaining workers could skyrocket. Companies may drop coverage altogether.

"If companies know their employees have the tax credit, it relieves them of the burden of providing coverage," said Sara Collins, who directs a health insurance program at the Commonwealth Fund. McCain's plan "moves people out of the employer system and to the individual market."

Some 74% of companies said that eliminating the tax exclusion would have a "strong negative impact on their workforce," according to a September survey by the American Benefits Council.

Estimates vary, but the Tax Policy Center estimates that 20 million people would lose their employer-based coverage by 2018. Roughly the same number would gain insurance through other means. But, overall, McCain's plan would do little to reduce the number of uninsured.

Also of concern, experts say, is the fact that the $5,000 tax credit would be indexed to inflation. As a result, it would not keep up with the swiftly rising cost of health care, which was soaring as much as 13% a year in the middle of this decade.

McCain advisers counter these concerns. Changing the tax treatment wouldn't hurt the employer-sponsored system and would allow more of the uninsured to buy their own coverage, they say. Also, his advisers say a McCain administration would keep an eye on the credit to make sure it didn't lag behind the cost of coverage, while also working to lower the rate of medical inflation.

Younger, healthier workers likely wouldn't abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain's senior economic policy adviser.

"Why would they leave?" said Holtz-Eakin. "What they are getting from their employer is way better than what they could get with the credit."