Daily News Updates - Health Insurance News

Don’t Elect McCain’s Health Plan, Pt.1 – McCain's tax proposal explained.

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The nuts and bolts of Mr. McCain’s health insurance tax credit go something like this:

1) Right now, according to the Kaiser Family Foundation, the American worker pays an average of $3,354 annually for a family plan. The employee rarely realizes that the actual cost is $12,680 annually (the employer picks up the rest). Neither is these are taxed.

2) After McCain’s change, this whole $12,680 will become taxable. If this family earns $50,000 per year, their taxes would increase by $3,170 for the first year (if in the 25% tax bracket).

3) When McCain’s $5,000 tax credit kicks in, this family can pay this new tax with it and even have a little left over. However, the tax advantage will continue to wane as premium rates increase three-times as fast as inflation. Within five years the tax will grow larger than the tax credit. After that, the worker (and family) will increasingly lose.

4) The real kicker is when the employer opts out of offering health insurance (as many as 74% are expected to). Now this family is faced with acquiring health insurance from a private insurer. If the family’s new plan costs the same as their old one, they will now be paying $15,850 ($12,680 + $3,170) annually for health insurance (the employer is no longer kicking in).
5) Before McCain’s plan, that family had only been paying $3,354 annually.

6) After McCain’s plan, that family would be paying $10,850 annually ($15,850 - $5,000).

7) In five years, when the health insurance tax catches up with the tax credit, that family would now be paying the full premium amount ($12,680), all things held equal.

8) But all things are not equal over time. That $12,680 this year will substantially rise in five years time. The family will not be able to afford that same plan.

9) Eventually the family will have to revert to a cheaper plan (Blue-Light Special). With the high deductibles per family member, this family will likely join the 25 million other Americans who are already in that boat (the underinsured). They will file personal bankruptcy, but still not escape the debt. They will become life-long debtors. Capitalism at its finest. Ask Mr. Greenspan.

Continued…
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