Taxing Health Benefits

It's Econ 101 (which most Finance Committee members apparently never took): A tax on health insurance is a tax on health insurance benefits:

Four Democratic members of the Senate Finance Committee announce a plan to set new fees on health insurers to generate as much as $100 billion over 10 years to help fund health care reform legislation. One of the group's members, Sen. Charles Schumer (D-N.Y.), says that the proposal is one type of financing mechanism the committee is considering, but that the structure of the fees is unclear.

Comments (15)

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  1. Larry C. says:

    Every one needs to hold onto his wallet when Congress is in session.

  2. Brian says:

    It is way past time that the insurance companies were taken down a notch. They should be gtiven a choice, reduce their pricing to fair-market value or pay a tax- a heavy tax!
    The tax increases should also be fixed to the insurance company and not allowed to be passed on to the consumer,nor should they be allowed to restrict benefits. Americans are already paying over-inflated prices because simply we have no choice. That way the only winners are the consumers, doctors, and hospitals. All too often, buisness passes cost to the consumer when costs go up. However, let those same costs of doing buisness go down and those savings are rarely, if ever, passed to the consumer. More than likely during time of low overhead, insurance raises rates not lowers them.
    It is a great idea and one that is LONG overdue. Make those who created the problem pay for cleaning up their own mess.
    It is time for government to actually fulfill their role and protect Americans from enemies foriegn and domestic.

  3. Howard says:

    Nationwide, prescription pills have become a societal force. Adults and children rely on them for a growing list of afflictions, including anxiety, depression, even shyness, for which few alternatives were available a generation ago. Nearly half of all Americans take at least one prescription drug this findrxonline. Meanwhile, direct-to-consumer drug marketing that touts new and expanded uses has become widespread. Adults and children alike are exposed to print, television and radio ads promising happier, more fulfilled lives. For young people, experts say, all these factors appear to have blurred the line between the benefits and dangers of the medications.

  4. John R. Graham says:

    “Brian”, can you please explain the rule you’d propose to ensure that health insurers did not pass the tax on to their members? I will save you the effort: It is simply not possible. Either insurers pass the tax on as premiums, or capital flees the health insurers, or a combination of both.

    Saying that insurers will pay this tax is like saying houses pay property taxes.

    The insurers have not created this “mess” (and I’m not so sure that it’s as much of a mess as many claim). The government has created this “mess” and the increased taxes are the price we pay for government failure.

  5. Stephanie Bond says:

    Brian, “thank you” for another knee-jerk demand for deep pockets to have their contents poured into the bottomless pit that is the government trough. Your certainty that only government can provide reduced costs in any field is unfortunately not supported by the TONNE of evidence to the contrary. Why aren’t the examples of education, infrastructure, social security, unemployment insurance etcetera etcerera not enough for your greedy destructive collectivism? Coercion – i.e. the use of legal force – cannot get any job done except the protection of properly identified individual rights. Those rights do not include the right to force others to give you a job, an education or a tetanus shot.

  6. Brian says:

    Insurance has plenty of capital and more to spare. if there are only 10-15 truly un-insured then that means that a yearly policy, which averages between 12-15 thousand a year, multiplied by the 300+ million americans supposedly covered and you will get a total in the trillions.
    Insurance can afford to swallow the cost of doing buisness and still remain extremely profitable.
    The simple truth is that premiums are inflated and prescription costs are inflated. Insurance has VERY low overhead because they have passed cost to the consumer and kept benefits to themselves as profit. The cost of equippement is a finite number. The cost of R&D is also a fixed amount and also is alrady funded by the taxpayer. Pharma is charging twice to cover one cost. Once when we fund R&D and next when we pay for the product. Pharma claims that their costs are high due to R&D but R&D is already paid for.

    As for what I would do to ensure that the insdurance/pharma didn’t pass another cost to the consumer is price caps adjusted yearly for cost of living increases at the same level as consumers. I realize it won’t happen because insurance and pharma have bought our government.
    Insurance certainly has created the problem. They have raised rates 3 times faster than wages with no increase in cost of buisness. Insurance has consistantly destroyed any attempt at reform in order to maintain a monopoly. It is pure and simple greed. Without competition,(and there is no competition in health insurance), Insurance has enjoyed a free hand with other peoples health and finances. It is the insurance comapnies that determine what treatments you get, what you will pay for that treatment, and when you can recieve treatment. It is insurance that has increased price, increased poverty,and increased our dependance on a office-lackey and his pen.
    You want freedomin healthcare? then get away from insurance which dictates every facet of healthcare. Your doctor doesn’t make medical decisions but the accountants that make healthcare decisions. The drive to force doctors to prescribe medications that costs $200.00 a pop when a drug that costs 20.00 a pop is as effective. Why? pure greed. The insurance company is profit only.
    We Americans have two choices, we can continue to pay inflated premiums or go without insurance. Insurance knows this and continues to raise prices because we have no other choice but to meet their demands. Pure blackmail.

  7. Brian says:

    If we can rely on insurance to do the right thing and lower premiums to fair-market value then fine. Unfortunatly that is not the case.
    The talk of cross-state purcahsing of insurance, (because insurance in some states is less), sounds great but in practice not so much. All the insurance companies will do is raise those lower prices to a standard high level. There is no reduction in cost to be had there.
    The point being that many of the “proposals” are faulty because they do not address the fleecing of Americans for profit. The cost of doing buisness decreases and yet premiums go up, the cost of doing buisness increases and prices go up. Until someone stands up against the tyranny and the monopoly of insurance nothing will change and we will all soon become indentured servants to the insurance companies.

  8. Stephanie Bond says:

    Brian, there is no such thing as a “fair” price, not one mandated by government. What there is, is the concept of trade. If the seller offers a price you are willing to pay, then you buy. If not, you look elsewhere. What is “unfair” or rather “too high” for you may be reasonable to someone else.

    In fact, this principle has resulted in the introduction of many new technologies which were very expensive at first. Only “the rich” could afford them, but gradually as the product became desired by many people, the economics of mass production enabled the cost to come down. And so now we have tv sets in every home that wants one. Almost everyone who wants a car has one. (I’m sure there are some who can’t afford it, but that’s more the fault of gov’t interference in the economy.)

    I think you don’t understand what insurance provides, nor how it provides it.

    There is no moral way to provide a given thing to “everyone.” Attempting to do so using the coercive force of government has as its result the corruption of the industry in question and the result that fewer and fewer can afford the product or obtain it. The avoidance of that result was cited as the reason for intrusion by government in the first place. A bit of irony that at the end of the day, it is government’s fault that health care costs have skyrocketed and that fewer people are able to afford health care or health care insurance.

    Yet another government intrusion into the health care industry will NOT have the effect you desire. What is needed instead is to get government out of the industry. Government’s only proper role is to protect individual rights, to stand by as a policeman ready to arbiter a disagreement and decide if those who allege wrongdoing are correct. Such objective decisions can be made. There is simply no way to prevent ALL wrongdoing. Nor is there a way to actually achieve universal coverage. It is a myth and a sham. Don’t buy into that b.s.

  9. Stephanie Bond says:

    To sum up, trying to force the result you desire will cause the destruction of the industry. Allowing private enterprise to earn its profits causes the product in question to become affordable to the vast majority. What is true for cell phones, plasma tvs, automobiles and 300 thread count Egyptian cotton sheets will be true for health care if only the government would get out and stay out and stop trying to achieve the result by force.

  10. Brian says:

    If there was ever a place where I could go and get the samne exact coverage for less, then I would go and get it. Your observation that if it costs too much go elsewhere is great but when everywhere charges the same high price there IS no-where to go. You don’t have a choice.
    You reference technology and the results of competition bringing down price through consumption (supply and demand), and production. But when you try and apply the model to health insurance it breaks down. Insurance has never gotten cheaper only more expensive. Benefits have never increased only decreased. If there were truly competition like that existing in telephones and automobiles, then health insurance would also decrease in price. That is not the case and 100 years is long enough to bring down prices. (insurance has been around for that long). Threre is no competition in health insurance and never has been. Doing nothing will ensure that competition remains OUT of the picture. I’m sorry we don’t agree but real life experience tells me that insurance has raised price without a concurrent rise in cost of buisness. Then when Americans have paid that, the price rises across the board. If I want to compete with your lemonade stand, I will under-cut your price. That forces you to either reduce your price or you will offer a cookie on top of the lemonade. That doesn’t happen in Insurance. What happens in insurance is a take it or leave it attitude, consistant increases in price, reduction in benefits, and spending up to 75% of income to meet insurance demands. There is no end in sight to this. The only other option is to have no insurance and pray that you don’t get sick. Insurance drives the cost of healthcare. Insurance IS the driving force behind the escalating cost of healthcare.

    As to how insurance works….
    Every penny collected goes into a pool and payments for services are deducted from that pool. Whatever is left is profit. Now lets raise the price, get more cash into the pool which leaves MORE profit after paying out services. The actual cost of the service hasn’t increased, just what you are charging to cover that service. The more you charge, the more profit at the end of the day. Now lets raise the price for services again because the customer has no other choice but to meet your demands, there isn’t anywhere else to go, there are no competitors offering the same services for less so you don’t risk losing the customer. Raise prices yet again and again and again…….
    THAT is insurance and the current system as it stands…. no competition, no increase in actual buisness cost, just increase in profits. The American Dream….. Soak everyone for as much as you can get. If you have the market cornered then raise prices to your hearts content. No-one will stop you.
    Again they have the upper hand. There is no-where to go to get lower prices, there is nowhere to go to ensure that when you pay your insurance premium that they will hold up their end of the bargain.
    Sorry but that is life not some stats on a peice of paper, written by some office stooge who’s only concern is how much they can get out of you and how little services they can get away with. Its not nice but it is reality.

  11. Jack says:

    The reality is that we do indeed need to reform the system, broadly speaking through competition and choice.

    However the public option is not a solution given the track record of the government who bought us “affordable housing”, the financial bubble, bailouts, “too big to fail” etc….. and at the same time keeps screwing us everyday with silly taxes and stupid regulations.

    They will drive the system to oblivion and we will continue to bleed.

  12. Stephanie Bond says:

    Brian, what you are conveniently omitting from your computation is the plethora of government already being foisted coercively on the population. There is already a ton of legislation & bureaucratic b.s. in the field of medicine and in the field of insurance. The answer is not more coercion. The answer is to ban ALL legalized initiations of force, which means to get rid of all the taxes, the quotas, the tariffs and other legislation which has as its mission the abridgement of rights.

    What you also forget is that nobody has a right to health care or health insurance. Each of us has two options: 1. learn to take care of yourself, and/or 2. hire those who have studied medicine on terms agreeable to both of you.

    The same principle is true for every field of human endeavor. Man is a rational being, and reason ends where a gun begins. There is no justification for the initiation of force, despite what unions & government & the kind of businessmen who like the current system because they couldn’t earn a living without being subsidized or having their competition hampered dishonourably using government favors.

  13. Stephanie Bond says:

    Oops – left the word “assert” off the end of my last post.

    It’s interesting, Brian, that you look at “prices rising” without taking into account the wider context and the causes of falling purchasing power and increased nominal & actual costs. Government edicts forcing companies to pay corporate taxes, pensions, sick days, payroll taxes and a host of other costs drives the cost up. Government manipulating the money supply by forcing interest rates to be other than what the market would cause them to be is another source of disturbance. Government printing money when there is nothing to back it up is another. All these factors are causing our purchasing power to decrease. No matter how many thousands of dollars you have a month, you are actually able to buy less than people could buy 60 years ago with a tenth the nominal sum.

    You dismiss the bureaucratic b.s. in your own mind, focusing only on what you want to see: a pile of money that isn’t yours, yet you believe you ought to have the right to dictate that it be expropriated and for what purpose. Your attitude is pervasive, but that doesn’t make it just or proper or rational.

    The government interventions into the economy are rotting the entire structure from the bottom up, the top down, the outside in and the inside out. There is only one path to salvation: reason and the banning of the initiation of force.

  14. Brian says:

    I am well aware that the “red-tape” drive SOME of the cost of doing buisness. I also real;ize that buisness costs also include payroll. Sick days is in the hands of the buisnesses. There is no mandate of paying sick days.
    True that by removing the adminstrative costs would reduce the actual cost of doing buisness but if you for one minute think that translates into those savings being passed to the consumer, (not just me but all consumers), you are ignoring the truth of history. Insurance has never reduced their premiums, only raised them. Insurance would take the relaxing “red-tape” as more profit. You and I and every other consumer would see 0% in reduced costs. In fact, historically, insurance would still raise their premiums. So I am aware of more than you think, I also see more truth in real-life experiance. I actually acknowledge that rules and regulations have real affects in society. It isn’t an amorphous blob to me. I see what happens when insurance destroys lives and finances of millions. (And now that reform has been killed again by republicans, millions more to come).
    I don’t want what isn’t mine. If I pay 15,000 dollars a year I want the insurance to at least pay a dime of MY premiums money, my part of the insurance pool rather than some beuarucrat putting that money in his pocket at my expense.
    Now insurance has free reign to raise prices with impunity. And if history can be any judge, insurance premiums are going to raise across the board at least twice this year alone. I hate being right but unfortunatly my predictions of a month ago have come true, republicans have scared, lied, and minimized the problem so much that nothing will get doner and even more people who have insurance will find their lives destroyed by illness. Poverty levels are going up, Coverage is coming down, costs arte going upo and quality is coming down. No-one to stop it, certainly not legislatures that have been bought by insurance.

  15. Brian says:

    As for medicaid requirements for qualification.
    1) you have children AND have a low-income
    2) You must be eligible for SSI payments
    3) You must be a pregnant female
    4) a family of fouyr must have a gross yearly income of LESS than 23,225
    5) you cannot have any assest that taken together add up to 2000.00 a year.
    6) after qualification, earning ability is capped at a yearly gross amount of 2,022.00 ( which when divided by 12 months equals a monthly gross income of roughly 168.00 a month)
    7) The point at which benefits are effected by earning power begins at 1,433.00 gross income a year.
    That equals out to earning a gross amount of 111.00 each month. Now while this doesn’t stop benefits or coverage, it reduces coverage. So can you get a job that pays you only 111.00 a month and pay your rent or feed yourself? How affordable is that?

    That means that your inststance of 450% of poverty levels is completely wrong.
    that means that if you own a car you are in-eligible
    That means that a family of 4 requires 23,000 or less and a single person would need to earn a gross income of LESS than 5,806 a year. I certainly do not qualify.

    SO again the facts speak for themselves and they show republicans for the liers they really are. Mis-representing facts is a typical weapon of republicans.
    These requirements are taken directly from the medicaid requirements listed on the internet.directly