Daily News Updates - Health Insurance News

Hazy, Risky Health Plan, Pt.4 – Bye bye, Miss American employee-based health insurance.

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The third tenet in Mr. McCain’s health insurance/care proposal is to eliminate the income exclusion for health insurance premiums. For the past always, the employers would pick up the tab for this on behalf of their employees. The average tax they paid was about $2,500 for a family policy. This was spared of the employee, but that would go away under Mr. McCain’s plan. Instead, this break will be replaced with a tax credit for employees (as much to $5,000 for a family plan if the employee owes that much tax), which would be paid by the government directly to the health insurance company. So people won’t get to spend it on anything else. Many people favor the McCain plan because they think they will have extra money to do with as they please. But this will not be the case.

Employees will be free to retain their group health insurance, provided the employer still offers it (many will not, owing to the loss of incentive to the employer. What happens is, the young and healthy will be lured away to private individual-risk plans where they may find cheaper premiums. This will leave only the older and less healthy with the employer. When this happens, the health insurance provider will have to raise their rates because it will be more expensive for them. The employer, who is already paying 75 – 81% of the employee’s premiums, will no longer be able to afford the new rates. Therefore, they will begin dropping benefits altogether. This is already the current trend, but is expected to exacerbate to a much greater speed.

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