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Opposition to Taxing Health Benefits Builds in the House

By Lori Montgomery
More than half of House Democrats say they oppose taxing health benefits to help pay for an overhaul of the nation's insurance system, setting the stage for a battle with key senators who say the provision is critical for controlling health care costs.

In a letter sent Wednesday to the White House and Senate leaders, as well as to House Speaker Nancy Pelosi (D-Calif.), 157 of the chamber's 256 Democrats urged Pelosi to reject the version of the tax adopted last week by the Senate Finance Committee: a 40-percent excise tax that would be imposed on insurance companies selling high-cost insurance plans.

Taxing health benefits "is a nonstarter for the supermajority of the House Democratic caucus," said Rep. Joe Courtney (D-Conn.) who drafted the letter on behalf of his colleagues. At a news conference outside the Capitol, Courtney and others argued that the tax would strike not only "the Paris Hiltons of the world," but also many middle-class families, particularly union members, people in high-risk professions, small business owners and self-employed people who have to buy insurance on the individual market.

The letter comes as House Democrats are in the midst of a long-running debate over how to lower the cost of their $1 trillion health care plan and how to pay for it. President Obama has said he wants to keep the cost of expanding coverage to the uninsured under $900 billion over the next decade. House leaders said they are getting close to that figure, but that they are still trying to decide how to trim the cost of subsidies for low- and middle-income families without leaving them to shoulder an unbearable financial burden.

House leaders would finance their plan by reducing spending on government health programs, particularly Medicare, and by imposing a surcharge on the wealthy.

The surcharge has gained little support in the Senate, however, where Finance Committee chairman Max Baucus (D-Mont.) has decreed that all tax increases would be related to health care. The Finance bill would reduce Medicare and Medicaid spending, but would also rely on the excise tax, which would be applied to insurance plans that cost more than $8,000 for individuals and $21,000 for families, with adjustments for people in high-cost regions and high-risk professions.

Obama has endorsed the idea, as have many economists, who argue that taxing high-cost insurance plans would discourage people from choosing them, forcing the price of insurance downward. Courtney and other House Democrats Wednesday rejected that argument, saying it ignores the fact that many people have no choice but to spend a lot of money on insurance.

For example, Courtney cited a self-employed lawyer in New London who pays $2,500 a month for routine Blue Cross coverage. And Rep. Sander Levin (D-Mich.) cited an analysis from congressional analysts showing that an earlier version of the Senate Finance tax would strike 41 percent of individual policies and 37 percent of family policies by 2019.

"In an economics classroom, maybe you could theoretically argue this is a way of implementing cost containment," Courtney said. But in the real world, "it defies the fairness threshold."

By Kathryn Tolbert  |  October 7, 2009; 4:10 PM ET
Categories:  Health Reform  
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1607 COWELL 'Interpr.' s.v., To tender his law of 'non Summons' to offer himselfe ready to make his law, whereby to prooue that he was not summoned.

Posted by: edtroyhampton | October 7, 2009 5:04 PM | Report abuse

There seems to be a lack of understanding here.
The reason we have 47,000,000 uninsured is because employer-subsidized health care only works if you have a job and your employer subsidizes your health care. Works for about 60% of Americans.

The subsidy that employees get - that's free money from the employer - should have the current tax exclusion revoked. That's not taxing the insurance, but the subsidy that the employers give.

Only John McCain understands this.

Posted by: bbegin | October 7, 2009 11:07 PM | Report abuse

If the excise tax becomes law, the Federal employees standard Blue Cross and Blue Shield plan will hit the taxing threshold by 2013 for individuals and 2015 for families if their 8.5% a year rate increase continues.

Posted by: ggwbike | October 8, 2009 5:03 AM | Report abuse

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