Congress Should End Employer Tax Exemption for ‘Deluxe’ Health Plans, Use Revenue To Help Uninsured, Op-Ed Says

Congress should limit a 50-year-old federal tax exemption that has "irresponsibly subsidized deluxe health insurance policies" for employers -- in large part for company executives -- a move that would raise additional tax revenue to help finance efforts to address the issue of the uninsured, John Fox, who teaches a tax policy course at Mount Holyoke College and has written several books on the subject, writes in a Washington Post opinion piece. Fox writes that according to a 2001 Congressional Budget Office estimate, such a move would raise $15 billion in additional tax revenue in 2004 -- an amount that would fund a ten-year, $90 billion health care plan proposed by President Bush and "make a significant down payment" on a 10-year, $650 billion health care plan proposed by presumptive Democratic presidential nominee Sen. John Kerry (Mass.). According to Fox, under the tax exemption, employers can pay for the full cost of "deluxe" health plans for company executives, all tax free, and pay "only a small percentage -- or even none -- of the cost of a basic plan for all other employees." Fox writes, "Subsidizing deluxe policies has negative economic consequences beyond the direct revenue cost to the government," adding that "by providing full or nearly full insurance coverage for even the most minor medical problems, deluxe policies reduce the incentives of both the insured and their physicians to minimize the costs of medical care," which would affect overall health care costs. The federal government "has the right and responsibility" to taxpayers "to impose conditions that are in the public interest," according to Fox. He writes, "In the case of tax breaks for health insurance, that interest is served only if the principal focus is on maximizing basic coverage for ordinary workers" (Fox, Washington Post, 7/25).