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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?

Editor's Note: Medical news is a popular but sensitive subject rooted in science. We receive many comments on this blog each day; not all are posted. Our hope is that much will be learned from the sharing of useful information and personal experiences based on the medical and health topics of the blog. We encourage you to focus your comments on those medical and health topics and we appreciate your input. Thank you for your participation.


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soundoff (12 Responses)
  1. C. Anne Dover, NH

    Not a chance.
    I'm one of those people with pre-existing conditions: two conditions, in fact, that cannot be cured, and could get me listed as disabled if they get too much worse. As it stands now, NO insurance company would independently accept me as a client, no matter what my tax credit. It's scary to think how close I could be to financial ruin or death without some guarantee that an insurance policy would not only be available to me but affordable with whatever tax credit might be available.

    April 6, 2009 at 21:52 | Report abuse | Reply
  2. James Doerrer

    James Doerrer
    N. Fort Myers, FL.
    I have a actuary table for all to see. To this day I have trouble with people, small business and corporations that want to give away money. When it comes to insurance, the Broker makes 55% of the premiums up front. Then because there are thousands of companies getting money for repeat management,50% more of the premium is going to non medical costs. If the government does it, there is no profit, no salesmen and only one set of management which eliminates redundant management personnel which saves even more money. This will immediately cut costs for health insurance by 75% to 90% or more and the Doctors will make more and we the people will spend less, same is true for hospitals and drugs. If one pays between $400 to $800 for insurance the coast would be $40 to $80.
    This will save you about $8640.00 a year or $4.15 per hour. This is almost an entire check if you make minimum wage.
    To All Senate, House of Reps. & Presidential Candidates, Also all news media.
    Why are corp. against this? Do they like spending unneeded money. Please read this.
    1. This in the matter of universal health care. (I am not a speech writer)
    2. When a candidate is speaking of this matter the speech should begin:
    A. Do you, voters, businesses, and corporations want to save a lot of money? If the answer is yes, here is how Universal Health Care will indeed save
    You lots of cash.
    .a. How much are you insurance premiums? In most cases it is more than $400.00 a month. ($4800.00 yearly) More if you have a family and pre existing heath issues, as much as $1400.00 a month. (16800.00 Yearly).
    .b. If the tax was to be $1000.00 per return this would come to $100bilion .Each person would save $2800.00 – $15800.00.
    Using the sling scale, we use now, the tax on lower income earners might be as low as $100.00 a year to, for high earners,
    The top earners, would be about $2300.00 so the top earners would save between $2500.00 to $14500.00.
    B. Businesses $ corporations, do you want to put billions into profits?
    .a. If you have 10,000 employees and you pay the bulk of the
    Premiums for your workers this would be $3600.00 per person,
    To $5000.00 per person. Total premiums are $50,000,000.00.
    .b. even if you pay tax on this you would save at least $35,000,000.00. The blue chip companies have far more employees, 100.000 workers = $350 mil. .and on up.
    C. Unlike HMO’s & PPO’s you can pick any DR. You will be able to get any supplement for elective treatments

    April 7, 2009 at 00:51 | Report abuse | Reply
  3. Kathryn

    Any system of private insurance that does not require all insurance companies to take all comers at a reasonable maximum amount will not bring the benefits we are looking. Already insurance companies profit by excluding those "pre-existing" conditions. If the price we pay for universal coverage is universal coverage (i.e., everyone must purchase insurance), then so be it. It's just not reasonable to continue the weird funding scheme we have now that leaves so many out and costs too much.

    April 7, 2009 at 11:03 | Report abuse | Reply
  4. Lisa

    At the heart of the insurance mess is the concept of being part of a pool. Does the insurance company keep money from diferent pools in different banks? Unlikely. Get rid of this concept already!

    Take all people into one big pool and some of us with pre-existing conditions willl use more services than some without but wasn't that the purpose of insurance? Sharing risks and costs?

    I own a Mom & pop pilates studio. My instructors are paid $30/hour as 1099 employees since most work only one night a week. Why should I reduce their hourly wage and dictate their health care rather than pay more and give them the discretion to join a larger national pool and cherry pick their options.

    My husband and I run small business. The last quote we were given was $600 per month/per person or $14,400 per year and we are healthy. What rate does the cancer survivor get?

    We need to take the flat bloated layer of insurance profit out of the middle of health care.

    We need to make it affordable enough to bring healthy people who can pay a premium back into the system.

    We need to get sensible people makeing decisions. I dropped Oxford when they wouldn't allow me to purchase a 6 month supply of a medication at $28/pill as opposed to a mandated two month suppply at $40 /pill. Who are these idiots?

    Lastly, and yes I am ranting, Obama, said in a campaign speech that people wait to get insurance until they are sick. Someone please let him know that at $14, 400 per year I am not waiting, Ii simply cannot afford it, if i want a roof over my head and a bowl of oatmeal for breakfast.

    April 13, 2009 at 17:55 | Report abuse | Reply
  5. suveer

    I really think if we want the best health care in the world, R+D, cheaper prices, affordable health care, and no decrease in the quality of doctors then tort reform is the only solution that can save the amount of money necessary and not decrease the quality of healthcare we need.

    Why has tort reform fallen off the chart. Is it because everyone in government is or was a lawyer?

    April 15, 2009 at 13:17 | Report abuse | Reply
  6. ocdiva

    I am the mother of a chronically ill teenager. His future is limited in many ways because he has a "pre-existing condition," which he would be penalized for from Day One under the current system. I would love to know that when I can no longer insure him, his right to affordable health care may not be unrealistic. Until then, though, keeping health insurance for my son will be the biggest concern in my life, one that affects every decision I make.

    April 19, 2009 at 16:42 | Report abuse | Reply
  7. rick

    Dear Dr.Gupta, My name is Richard and i am a medical photographer and i photograph child and eldrly abuse. I must say must job is not easy in this repsect. However all that has been going on with gay marriages and the battle for equal rights, i can't help but feel we as a society we have no morals. When a child is sodomize the police angencies go after the person who has done this horrible act. and the judges puts the person in jail, for a long time. But the judges who have allowed gay marriages to be legal are creating a double standard.They go after child molesters and reward gays. You being a parent, if your child was sodomize you would be hot and angry. Just like any normal parent would be. However gays are allowed to get married in some states. What kind of normal person would condone such a law to past. Every part of the body is design for certain things.
    God says being gay is a sin. The anus is not design for anything to go up into it. That why there are men and women for sex. We are suppose to protect our kids from any abnormal things in life and teach our kids to respect our bodies. And it makes me very angry that the courts would allow gay marriages. I would ask that you and other doctors and judges would have a debate or have larry king do a show about this.. i can't seem to get anyone to listen to my concerns, and it is a valid one when it comes to health and the well being of a normal healhty kid. Every one has seem so much about equal rights for gays and have forgotten about the message it is condoning. Botttom line is, it not normal to have sex in the anus and i don't want any kid thinking it is ok to do so. Thanks and hope you bring a show about this. Richard

    April 23, 2009 at 22:52 | Report abuse | Reply
  8. Robert Westafer M.D.

    Real Healthcare Reform: Changing the Incentives and the Rules of the Game; Creating an Electronic Health Record for Every Citizen Who Wants One.

    If you have the financial resources of Bill Gates or Warren Buffett you needn’t pay money to a health plan each month, since if you get sick or injured – even very seriously – you have more than enough money to pay all your medical bills yourself.

    But those of us with significantly less financial resources must find some other means of dealing with the thousands or even hundreds of thousands of dollars or more of medical expenses that we might incur should a serious illness or injury be our fate.

    Enter the concept of “health insurance”.

    Large numbers of individuals and/or their employers pay some money each month into one or another big pot called a “health plan”. Those individuals who remain essentially very healthy for many years and then suddenly die or perhaps leave a particular health plan for some other reason – if they have put more money into the pot than was taken out to pay all their medical expenses – wind up helping to pay the medical bills of those members of the health plan who become seriously ill or injured and incur a lot of medical expenses.

    Many members of health plans don’t seem to fully understand or perhaps choose to ignore the fact that if they become seriously ill or injured, for the most part their medical bills will be paid by the members of their health plan who have remained healthy. Some Americans believe that healthcare should become a “right” of every American citizen. If a nationalized single payer health plan were enacted, every American citizen who became ill or injured – for whatever reason – and incurred significant medical expenses would for the most part have his or her medical bills paid by all U.S. taxpayers.

    For any health plan to work which has a large number of people pooling their money to essentially pay the medical bills of whichever members of the plan become seriously ill or injured, rules must be established as to when and how much money may be taken out of the pot e.g. “legitimate” doctor bills and hospital bills. Equally important is keeping track of the amount of money that is being put into the pot each month in premiums paid by health plan members or their employers. If too much is being paid out in expenses as compared with the amount being received in premiums, the pot will soon become empty and the health plan will go broke.

    As previously mentioned, the monthly premiums paid by individuals or their employers go into a health plan’s big pot from which “covered” healthcare expenses are paid. But also from this pot are paid all the health plan’s administrative expenses including what may be big salaries and golden parachutes for CEO’s and other “healthcare executives” – individuals who may be paid to find technicalities of one sort or another in the health plan’s agreements so the health plan can deny or reduce payments, raise premiums, cancel insurance, or in one way or another minimize or exclude “bad risks” from the health plan. All such questionable business practices are done to enable the health plan to make a profit and remain in business.

    Currently we are experiencing continual increases in healthcare costs that are unsustainable and which, if unchecked, will soon seriously threaten the future of the entire American economy. Healthcare costs must be controlled, but how? If a healthcare system made up of health plans is going to have a chance of meeting the needs of its health plan members and simultaneously be able to keep costs under control, something very critically important must first occur.

    It turns out that a lot of illnesses and many injuries are actually preventable.

    Although health promotion and disease and injury prevention receive fashionable and socially acceptable lip service, the fact is that most of the participants in what should be more appropriately called our “sickness and injury care system” actually have no significant financial incentive whatsoever to spend any significant time and energy in genuinely promoting health and helping to prevent disease and injury.

    Much to the contrary. Other than the actual members of a health plan – patients and potential patients – and their employers and perhaps the employees of some health plans, most participants in our sickness and injury care system – because of the way they are paid – have an enormous (if unspoken) financial incentive for massive amounts of disease and injury – much of which is preventable – to continue to occur in America. Strictly from a financial point of view, for those whose incomes come solely from the treatment – not the prevention – of illness and injury, the more illness and injury that occurs, the better. And if the illness or injury is serious and requires perhaps many expensive tests, multiple surgical procedures, and other very complicated prolonged treatment in an intensive care unit, so much the better; just as long as those unfortunate individuals who happen to be ill or injured are “covered” by “good insurance”, i.e. health plans that are reliable bill payers.

    This is not to say that there are not some excellent very dedicated and hardworking doctors and other health professionals – although they are paid on a fee for service basis to care for illness and injury – who nevertheless attempt to essentially work themselves out of a job by making health promotion and disease and injury prevention a top priority with their patients.

    It should also be recognized that some existing health plans – e.g. Kaiser and Group Health – combine insurance, doctors, and hospitals into a single entity in such a way that provides everyone – including all the health plan’s doctors – a real incentive to spend time and effort with patients on health promotion and disease and injury prevention as well as on early diagnosis and treatment.

    But unfortunately the above examples represent only a small part of the sickness and injury care system that currently exists throughout America.

    For the most part – because of the way they are compensated – the majority of doctors and other professional providers, acute care hospitals and long term care facilities, pharmaceutical manufactures and pharmacists, medical and surgical equipment manufacturers and personal injury and malpractice attorneys – among others – depend mightily on massive amounts of disease and injury occurring in America; and these participants in our sickness and injury care system would be significantly negatively impacted if a lot of the preventable illnesses and injuries were actually prevented. This must be changed.

    Unless the incentives and rules are changed to give as many participants as possible a real financial stake in health promotion and disease and injury prevention, in early diagnosis and treatment, and in maximizing health and minimizing disease and injury, healthcare costs in America will never be brought under control. Making appropriate changes in the incentives and the rules of the game is the real task and challenge of “healthcare reform”.

    What about financial incentives for individual health plan members? Should individuals receive a financial incentive to be healthy? It is well recognized that engaging in regular exercise, abstaining from tobacco, and eating moderately so as to maintain a reasonably normal body weight are all significant factors in helping to promote an individual’s health and wellness. These healthy behaviors can all be confirmed by simple tests performed or ordered in a doctor’s office. Why shouldn’t those individuals who practice these health promoting behaviors and comply with recommended immunization schedules and appropriate preventive screening examinations such as for colon cancer and breast cancer pay significantly less in premiums to their health plan each month than those who don’t?

    To really reform healthcare we must find ways – through changes in incentives and the rules of the game – to actually prevent what is preventable, to maximize early diagnosis and treatment, and minimize disease and injury with all its associated cost. We must find ways for participants to be part of our “healthcare system” and not just a part of our “sickness and injury care system”.

    Significant changes in the rules of the game for our legal system – tort reform – is also critically important so that the gaming of the system now being done by personal injury and malpractice attorneys and their clients can be ended and so that the exorbitant costs to physicians and other professionals for malpractice insurance can be dramatically reduced.

    Truly transforming our “sickness and injury care system” into a “healthcare system” by making significant changes in the incentives and the rules of the game may seem to be a formidable task and one that probably has never really been done before on a large scale anywhere in the world. But it is a worthy task and a critically important task for the future of America and its people.

    One significant part of this process is developing the capability of creating an electronic health record for every American citizen who wants one. We need a standardized framework that will allow every American citizen to have an individual electronic health record – a computerized medical record – that can be accessed by all the doctors who care for a particular individual, regardless of wherever on the planet the doctors or the patients happen to be. It would be like having your own personal online banking account that only you have the password to, but which you can share with the doctors who are caring for you, wherever you or they may be.

    I applaud those who are using their energy and expertise to upgrade our deplorable current paper medical records system and bring medical records in America into the 21st century. Developing a standardized framework for an electronic health record – for every citizen who wants one – created by your doctor with your assistance, with proper security and safeguards – is something that our national government can and should do as a part of healthcare reform.

    If done well, electronic health records will be transformational in helping doctors efficiently and effectively care for patients and will save an enormous amount of time, effort, and money which is currently wasted on needless and frequently inaccurate duplication. And having an accurate electronic health record for an individual will also facilitate appropriate health promotion and disease and injury prevention for that individual. Like the telephone and the computer, someday we will all wonder how we ever got along without individual electronic health records.

    All this requires action, not just words. Now is the time for Americans and their leaders and doctors and other health professionals to step up to the plate and begin the process of transforming our “American Sickness and Injury Care System” into an “American Healthcare System” that is worthy of our great country.

    Robert Westafer M.D.

    May 6, 2009 at 05:26 | Report abuse | Reply
  9. Isabelle

    $1,908.00/year? Unbelievably GREAT coverage! My family is currently uninsured and has been for over 1 year. Cobra benefits skyrocketed to $1,600.00/month, not including deductables and co-pays. Our insurance, hopefully, will be reinstated October 2009. Once reinstated, our out-of-pocket expenses for insurance alone – $7,200/year, not including deductables($3,000.00/year per family) and co-pays.

    CNN article: Obama wins business support for Healthcare Reform.
    "bundling of payments" might, at first glance, seem a great solution. It is not. Have you been a victim of the TV/phone/internet service bundling? DirectV/verizon's bundled packages are the largest scam running. DirectV's promised low price and perks are not honored. Call DirectV and ask why? Their response: We are giving you a $10.00 discount on your internet service (they don't provide my internet service). Or: you didn't fill out some mysterious internet coupon you were never told about. Or: the price didn't include turning the service on. The excuses are endless...Wish to simplify? Want out? LOL

    Bundling medical payments opens the door for extremely fraudulent business practices. It will not lower any medical costs nor will it protect the patient. Double talk will ensue. Hidden fees will eventually surface.

    May 11, 2009 at 06:26 | Report abuse | Reply
  10. Bob

    We all have choices in America. It's up to you to provide Insurance for yourself and your family not the goverments. So go to collage and get a better job so you will have the benifits that are given at that level. I travel away from my family every week so I can give them the things they need. I don't sit in the town I live in and complain that i don't have this or that but go out and get it. Sacrifice, that is what is needed.

    May 16, 2009 at 15:05 | Report abuse | Reply
  11. Brian Silver

    I should add that I was a consultant at Sanford University Medical Center and rolled out their Online Computer based Medical Records System. All paper if generated is scanned and the billing department can get bills to payers much more quickly after the patient is discharged. This meant Stanford Medical Center got paid more quickly and had the money in the bank. Kaiser in San Francisco has online medical records of a different type, entered at the terminal in the Doctor's office. I can see my test results the next day online and can email my Dr. with any questions. San Francisco has medical insurance for all citizens with Kaiser providing clinics for service. CNN needs to look at this system.

    June 9, 2009 at 12:32 | Report abuse | Reply
  12. Brad Larson

    At age 50 and self employed the only insurance that seams affordable is with a $3,000 deductable. In the last ten years I have never had my insurance company pay for anything.
    When it comes to a national health care it feels like we already have one. The senate and congress have lifetime health insurance. All state and local employees, all military, police, fire, teachers, librarians, public works, public transportation, highway department, I know I have missed a bunch of them including Medicare, Medicade, S chip, illeagal alliens, unemployed and don't have any money people have better health care than I do. And I (we) pay for it already thru our taxes. It seams to me if you are with a for profit health insurance company this only give you the ability to sue when your denied payment. What Is the answer?

    July 1, 2009 at 14:50 | Report abuse | Reply

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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.