I would like to shed light on the issue, as cited in the article that

"But employers haven't wanted to lose the deduction."

As an employer, I pay nearly $320k for my employees' health care. Sure I'm saving nearly $30k in my contribution of the payroll tax, but the alternatives being proposed nationally are far more threatening. Were I not providing health insurance to my entire workforce, I would save far more than that in admin costs and broker fees. Without Bush's proposed deduction, the employees themselves would face a stiffer burden of anywhere from 15% to 35% on combined incremental income.

Were a plan to be adopted such as in California, I may be subject to a 2% to 4% PR tax on ALL wages (as opposed to ~9% on the $320k above). With $3 million in wages, my new tax burden would exceed the amount saved by providing the insurance in the first place. Thus, the market would not allow a 1 to 1 upward shift in wage rates. And this is the cornerstone argument of any decoupling from employers.

The only options that should be included in any hybrid "solution" are those that reduce government involvement and reduce regulations. The market will correct when government interferences are removed. Even in Massachusetts, there is discussion on removing the prescription coverage mandate for the new "universal" coverage.

But talk of the need for universal coverage is another mandate that should be avoided. This is nothing more than a veiled argument to socialize the entire process. According to the Kaiser Foundation, around 5% of all claims go unpaid. While significant, it does not account for the routine double digit inflation of the industry. In fact, in order to participate in the Medicare system, health care providers are required to give away some amount of health care anyway.

Regulations are driving up the costs such that federal and state governments are MANDATING that the industry over-insure to address every foreseeable condition. In our renewal, we were told by our insurance representative that 72% of our participants used less than $1,000 per year in health care, yet the only conventional products suited to my employees cost more than $12k per year per family.

The HDHP/HSA approach is the only tack that tends toward a market based solution. Even ideas like requiring community rating and requiring coverage to be purchased do not satisfy the needs of all. They end up Mandating insurance risk analysis (and thus over-insuring), and coercing money from those who do not want to over-insure themselves. You could even argue that a "safety net" entitlement already exists in the form of free care Mandates.

Therefore, despite some possible highlights, I would not mix and match any of Wyden's plan. I do agree that of many of the government based solutions, it is the least damaging, but I do not see how it can achieve the ultimate goal of inducing the health care industry to trend on inflation numbers as opposed to 5x to 10x that. Bush's proposal does little more than provide additional incentive for participation in market based solutions. That's really all we need.

Roland,

Great comment. I want to use your numbers to illustrate the interesting features of the Wyden plan and, because you have direct experience with the side of health insurance that’s invisible to most Americans, see what you think. The interesting part (to me, at least) is not the individual mandate, but the fact that it purportedly does return some market influences to the healthcare market.

At least initially, the Wyden plan is very different from the California plan. In the first two years of Wyden, you (as the business owner) take the $320K you’re spending on employee health insurance and give it directly to your employees in cash that they can spend on individual insurance policies. Individuals get a tax deductions for money spent on insurance, similar to the Bush plan deductions.

Now, you do lose the business deduction that Barone referred to. (This is different from the Bush plan, where businesses keep the deduction). I’m not sure if Wyden’s plan allows you to split the $320K between the salary bumps and the increased taxes, or if some mechanism is written into the law that forces owners to absorb the entire increased tax burden.

I think this plan could work if, as you suggest, reforms allowing people to have the option of spending their healthcare "raises" on HSA’s and high-deductible health plans, even in mandate-heavy states like Rhode Island, are implemented at the same time the other changes proposed by Senator Wyden are passed. This may be where there is some room for compromise.

Anything here you think you can work with?

The major feature of the Wyden plan that I don’t like kicks in after year two. After year two, Wyden wants to administer everything through a payroll tax, instead of through paying people directly. Somehow, money plucked from paychecks by the government is supposed to make it to the insurer of an individual’s choice. (As I’m writing this, I’m wondering if the Wyden plan post-year-two could be accurately described as a healthcare voucher system? Hmmm.) But if letting people buy their own insurance works for two years, then why not let them keep doing it?

Finally, there’s also a large portion of the Wyden plan concerned with subsidized insurance to the poor, paid for through what will have to be additional payroll taxes relative to now. I am not sure there’s anything unique about the Wyden plan here, and am skeptical about the fiscal feasibility of this part of the plan, but don't want to reject what could be innovative parts of his plan, because some other parts are less than optimal.

Andrew,

Feel free to use any of the numbers I put up. Most of them are off the cuff estimates, but I'd be happy to share actuals with you if you'd like. I'll even sit down with you for an hour to thoroughly analyze the numbers.

I'm not sure that a simple reimbursement to the employees will quite do the trick, though mostly because of the PR tax kick in yr 2. That is quite literally an absolute showstopper for me. To be honest, in my review of Wyden's plan after you cited it back in January, I stopped cold at the suggestion of the 2yr new tax.

Unfortunately, I think the tax is inevitable if the government (state or federal) takes it upon itself to provide universal coverage for its citizens. That's why I have trouble with any of the proposals including that mandate.