Health insurers are applauding President Bush’s rejection of a proposal to cap the tax exemption for employer-sponsored health care benefits.
The proposal was made by the Advisory Panel on Federal Tax Reform, which the White House commissioned to suggest changes to the federal income tax system. The panel suggested a cap of $11,500 or more for a family, noting that the current system could encourage expensive so-called “Cadillac” health plans and discourage consumers from making economical health care decisions.
Karen Ignagni, president of America’s Health Plans, said the president’s decision was “good news,” adding “the agenda for 2006 should focus on expanding rather than contracting care.”
National Association of Health Underwriters CEO Janet Trautwein also praised the rejection of the cap. “It’s an idea that will have unintended consequences, and we’re very happy the president has decided not to move forward with this commission recommendation.”
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The proposed cap, she noted, could have affected some consumers that do not carry “Cadillac” coverage because it only measured the price of coverage, rather than the factors contributing to that cost.
“Health insurance rates may be higher for certain employer groups for any number of reasons,” she said. “For example, in certain areas of the country the cost of insurance is higher than in other geographic areas, and a group who has a large number of older or sicker employees also may have higher health insurance rates. Removing or capping the tax exclusion for these groups would result in new taxes for all employees in the group, including those who are low income.”