April 6th, 2009
12:20 PM ET

Will you be taxed on your health insurance?

By Caleb Hellerman
CNN Medical Senior Producer

If you’re anything like me – married, three kids – you count your blessings if you have health insurance through a job. At CNN we have nice options; I have a policy for which I pay $1,908 a year. From what I’m told, that’s less than 20 percent of what I’d pay if I had to buy coverage on my own. CNN picks up the rest.

I say, “From what I’m told,” because I’ve never had to shop for health insurance on my own. Few people have, unless they run their own business. Most people have coverage via their job, coverage through Medicare or Medicaid or else no insurance at all.

So I thought it was pretty interesting when President Obama’s budget director told a congressional hearing that it should “firmly be on the table” to tax my health benefits, and yours. You see, back when it was John McCain’s idea, then-candidate Obama said taxing health benefits would be “the largest middle-class tax increase in history.” Vice-president Biden said it could cause 20 million people to lose their insurance.

I’ll take a step back to explain. The Hellerman family gets about $10,000 towards an insurance policy, but we don’t pay taxes on that “income.” CNN doesn’t pay taxes on the benefit either – that’s an incentive to offer health insurance instead of, say, an extra $10,000 in salary.

In federal budget terms, those tax breaks are big. For all the companies and all the workers in the country, the Office of Management and Budget estimates those tax breaks suck about $200 billion a year out of the U.S. Treasury. With the president scrambling to pay for a massive overhaul of the health care system, well, everything is on the table. Worth noting:

– Last month, President Obama named Ezekiel Emanuel as a special adviser on health-care policy. A physician and noted health expert – not to mention the brother of the White House chief of staff – in 2007 Emanuel wrote that we should replace the current health insurance system with vouchers to help every American buy his or her own coverage.

– Sen. Max Baucus, D-Montana and head of the Senate Finance Committee, supports reducing the tax breaks on employer-offered insurance. White House economic adviser Jason Furman has suggested getting rid of them altogether – although that was before he joined Team Obama.

– A bill in the Senate – S. 334, the Healthy Americans Act – would replace the tax breaks with large tax credits to help families and individuals buy their own insurance. The bill has seven Democratic and seven Republican co-sponsors.

Without the tax incentive, it’s likely that a lot of companies would stop offering health insurance. But Sen. Ron Wyden, D-Oregon, who wrote the Healthy Americans Act, told me that most people would be better off. That’s because under his plan, a family like mine would get a $17,000 tax credit – plenty to afford a nice policy.

Another benefit: If my coverage weren’t tied to work, I could switch jobs without having to worry about finding another decent policy. That would be nice, for the same reason I don’t want to shop for new car insurance or a new homeowner’s policy just because I was laid off or I want to try a new career move.

It starts to sound like a good deal, at least for people like me who are generally healthy. It’s scarier for people with pre-existing conditions – illnesses that make it hard to find insurance. One possible solution: the Healthy Americans Act would require insurance companies to take all comers, even those with pre-existing conditions.

Not long ago, changing the system that provides health insurance for most Americans was a political non-starter. But with more people unemployed – and more workers seeing job benefits slipping away, anyway – big ideas like this one are getting another look.

Would you give up company-sponsored health insurance, if your boss paid you enough to buy your own policy?

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Get a behind-the-scenes look at the latest stories from CNN Chief Medical Correspondent, Dr. Sanjay Gupta, Senior Medical Correspondent Elizabeth Cohen and the CNN Medical Unit producers. They'll share news and views on health and medical trends - info that will help you take better care of yourself and the people you love.