• Government
• Profession
• Business
• Opinion
• Health

• Health reform
• H1N1
• P4P
• EMRs
• Medicare
• Liability
• AMA House
• » More

• Book Excerpt
• Business Pitch
• Meetings
• » More

• Contract Language
• Ethics Forum
• In the Courts
• Practice Management
• Technically Speaking
• » More

• Issue dates
• Regions
• Health plans
• Sections
• News briefs
• Columns
• Editorials
• Letters
• Writers
• Other years

• Search tips
• E-mail alert
• Radio
• RSS
• Mobile
• Subscribe
• Institutions
• Staff directory
• Advertising
• Permissions
• Reprints
• News media
• Site guide
• Useful links
• About
• Premium
• Contact

Tax panel: Overhaul health insurance treatment

The plan aims to level the playing field between workers who currently enjoy tax-free health insurance and those who do not.

By Amy Snow Landa, amednews correspondent. Nov. 21, 2005.

• PRINT|
• E-MAIL|
• RESPOND|
• REPRINTS|
• SHARE

Employees who buy their own health insurance should receive the same tax break for the cost of their premiums as those who receive coverage from their employer, according to the President's Advisory Panel on Federal Tax Reform. A second and more controversial recommendation is to put a cap, for the first time, on the tax exclusion allowed for health insurance.

These and other proposals for streamlining the nation's tax code are included in the group's final report issued on Nov. 1.

Under the current system, workers do not have to pay taxes on employer-provided health coverage, and the self-employed can deduct the cost of their premiums from their income taxes. But workers who buy their own health insurance must pay premiums out of their taxable income.

The panel, chaired by former Sens. Connie Mack, a Florida Republican, and John Breaux, a Louisiana Democrat, recommends that all taxpayers be allowed to purchase health insurance using pre-tax money. This would "level the playing field between workers who have access to employer-provided health insurance plans and those who do not." The proposal is one of a number of major changes to the federal tax system that are included in the panel's report, "Simple, Fair, and Pro-Growth: Proposals to Fix America's Tax System."

But the new tax deduction would offer little or no help to low-income workers trying to buy their own health insurance, said Len Burman, PhD, co-director of the Tax Policy Center. The center is a joint venture of the Urban Institute and the Brookings Institution, both of which study and issue reports on health and other issues. "Most workers who are uninsured have relatively low incomes, so a tax deduction is worth very little to them," Dr. Burman said. "The people who would benefit most are those in the top tax bracket, so it's an upside-down subsidy."