The head of an employer group warned here against rewriting federal income tax laws in a way that discourages employers from offering health insurance.

Andrew Webber, president of the National Business Coalition on Health, spoke here at a House Education and Labor Committee subcommittee hearing on ways to help the uninsured through employee benefit programs.

The committee’s Health, Education, Labor and Pensions Subcommittee organized the hearing in the wake of Bush administration proposals to replace the current unlimited group health tax exclusion with a deduction that would be available to everyone with health coverage. The Bush proposal would, in effect, cap the deduction at $7,500 per individual and $15,000 per family.

“The overall issue of a standardized tax deduction for the purchase of health care is worthy of open debate in Congress,” Webber said, according to a written version of his remarks. “Leveling the federal tax playing field in terms of a standard deduction for everyone could be an effective strategy to help individuals that purchase coverage on their own.”

The current group health tax break is especially unfair to self-employed consumers, Webber said.

But the NBCH “is skeptical of efforts to contain escalating costs…by making the purchase of health insurance over a certain amount … taxable income,” Webber said. “Essentially, such a strategy could weaken the foundation of the employer-based system, particularly since the current system already is shifting significant costs onto employees through copayments, deductibles and various geographic based inequities.”

Another witness, Linda Blumberg, who spoke for the Urban Institute, Washington, said lawmakers should adopt 4 key principles when trying to increase the number of insured individuals:

1. Subsidize insurance benefits for lower-income individuals.

2. Guarantee a source of coverage for all potential purchasers.

3. Create a mechanism for broadly spreading the costs of covering higher risk individuals.

4. Either create a mandate requiring that individuals be covered or create a mandate for individuals combined with some form of employer mandate.

Blumberg also recommended that lawmakers restructure the current tax incentives for purchasing health coverage to provide “those with the greatest needs the greatest assistance, as opposed to the opposite, which is true today.”

The federal government already pumps enough “tax expenditures” into health insurance to pay for comprehensive health care reform, but “the current spending is not particularly effective in expanding coverage…since it subsidizes most those who are most likely to purchase coverage even in the absence of any subsidy,” Blumberg said.

The American Benefits Council, Washington, responded to the hearing by saying that everyone has to work together to help the uninsured.

“Our vision of health care reform does not embrace extreme ‘solutions’ that rely exclusively on either individuals or the government to take control of the health care system,” ABC President James Klein says in his group’s statement. “Rather, we see real reform as only being possible if we embrace the concept that it is a shared responsibility that will require increased efforts by all the major stakeholders, especially individuals, employers and the government.”

Klein, who did not testify at the subcommittee hearing, said the parties involved could help increase the number of insured workers by developing objective standards for providers, increasing incentives for healthier lifestyles and preventive care, improving funding for Medicaid and other public programs, and expanding tax incentives for health coverage.