Archive for December 8th, 2012

Huge Employer Tax Breaks on Health Insurance

Saturday, December 8th, 2012

The cost of health care is expensive.  Someone has to pay, whether it be individuals, the government, or employers.  With President Obama’s Affordable Care Act, some employers will be forced to offer health care to full-time employees when they didn’t in the past.  This has caused the threat of many employers like Papa Johns and Applebees to say that they will be forced to cut hours so that they don’t have as many full-time employees and don’t have to offer health insurance benefits.  They say that it is too expensive.

But there is another side to the health insurance cost story, according to Bankrate’s Jay MacDonald in the article “Health insurance and tax breaks.”  Health insurance is actually the biggest tax break given out by the government every year.  Neither individuals or employers are taxed on the value of their health insurance, something that is unheard of in other aspects of the government.  That tax break actually makes the non-taxing of health insurance the third biggest health care program in the country.  The first two are Medicare and Medicaid.  Now I realize that these programs aren’t the exact same thing, but I find Mr. MacDonald’s article interesting because we don’t often see this side of health insurance costs or tax breaks.

One health economist estimates that the federal government actually gives back $250 billion each year by not taxing health insurance in the same way that they tax wages and most everything else.  In 2018, the government is looking to tax some of the “best” health insurance plans with low deductibles and high benefits.  These plans are usually reserved for the top jobs in corporate America.  The tax breaks are not likely to disappear anytime soon and they aren’t all good.  They actually add to the inflation of health care by encouraging more doctors visits, since they are covered, and helping those with good health insurance more than those without.

Eliminating the tax breaks on health insurance would essentially be considered a tax increase, which would definitely alert the masses and cause an outcry nationally.  This article questions whether Americans would be better off without employer health insurance.  The state run health insurance exchanges, that would help people find less expensive individual and family plans, will be active in 2014.  It begs the question of whether we would be better off as a country with private health insurance rather than employer plans and government help.  Maybe, maybe not.  It’s just another piece of the difficult problem of expensive health care.