Tip of the Month for June 2007

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TIP: Stay Informed as Health Care Reform Looms Large…Again
It’s been more than a decade since politicians geared up to debate health care reform, but now with health care costs soaring and more than 45 million people without any health insurance, the issue is back on the front burner, and it is a major issue for all serious presidential candidates. There are several proposals under discussion, and, as may be expected, each scenario has its winners and its losers. Here’s a quick overview of how things stack up:

A Government/Private Insurance Hybrid
Perhaps the most favorable option for the self-employed and for entrepreneurs who can’t carry the expense of health care benefits, a hybrid system would allow private insurers to operate but would also guarantee people universal coverage regardless of where they work. Politicians are debating several versions but the main contenders are:
  • A system that dispenses with the link between employers and their employee’s health care coverage, and lets you choose your own private insurer. These insurers would be subject to strict government regulation, and would be funded by employers who would provide workers with either vouchers (as some suggest) or with funds mandated for health insurance.

  • Another variation of the “hybrid” proposal calls for a public health system financed by contributions from employers who do not offer health care coverage to run in tandem with the “traditional” employer-based system.
A Taxing Proposition
Another idea that is attracting bi-partisan support involves tax reform. This could be an attractive idea to the self-employed, or to those smaller businesses, who currently can’t afford to offer health benefits to their staff. The Internal Revenue Service (IRS) gives up about $200 billion in tax money each year by exempting the premiums employers pay into plans as well as employees’ own premiums. People who buy their own plans don’t get this exemption.

President Bush wants to address this by replacing the existing exemptions with a standard tax deduction for people buying their own health insurance. An individual would be eligible for a $7,500 tax break and a family would qualify for $15,000. This proposal also would allow health care policies to be “portable”—i.e. if you changed job you would keep your existing relationship with your insurer. Critics note that individual plans will mean higher premiums because they won’t get the advantage of risk pooling that employee plans enjoy.

A Health Insurance Mandate
There are at least 45 million uninsured people in the United States. Individual consumers with insurance and taxpayers are footing the bill for their care in the form of higher premiums and government subsidies. In some states, unpaid health care bills add approximately 10 percent to plan premiums. With these statistics in mind some politicians believe that health insurance should be mandatory for everyone. It’s the law in Massachusetts already where special programs aim to make it easier and cheaper for individuals and small businesses to find affordable coverage. Scofflaws are fined, but the state still has to provide subsidies to allow the working poor and children access to basic care, and is finding enforcement difficult. Other proponents of mandatory health insurance include Presidential candidate John Edwards who (as of May 2007) is the only contender to have made public his specific proposal for universal coverage.

As the Presidential election looms closer, this is one issue that will continue to attract attention. Change is coming and it will affect us all, as employers, or employees, and as health care consumers. Stay tuned.


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