Senator John Kerry has a proposal to tax insurance firms on their most expensive health plans, a Finance Committee source said.
(Yoon S. Byun/Globe Staff)
Kerry wants insurer tax to pay for care
Senator John Kerry has a proposal to tax insurance firms on their most expensive health plans, a Finance Committee source said.
(Yoon S. Byun/Globe Staff)
WASHINGTON - Senator John F. Kerry, Democrat of Massachusetts, eager to find a compromise on paying for the healthcare overhaul without taxing employee benefits, has stepped into the fray with an idea that could help Senate Finance Committee negotiators close the gap.
Kerry has floated a proposal to tax insurance companies on their most expensive healthcare plans, a Finance Committee source said. The tax would raise tens of billions of dollars to help pay for the $1 trillion expansion of healthcare coverage, said a Senate Finance Committee source who was not authorized to speak on the record.
Such a tax would also have important side benefits. It would discourage the overuse of healthcare services, because employers would have an incentive to buy cheaper, less generous healthcare plans for employees, to avoid the levy. It would also put pressure on insurers to reduce premium prices, the source said.
The tax, whose rate has not been specified, would only apply to the most expensive insurance products.
Kerry’s idea is meant to replace a previous Senate Finance Committee proposal to tax employees on their benefits, an idea that proved unpopular with unions as well as President Obama’s administration.
Taxing insurance companies could be more palatable politically than taxing individuals. But insurance companies and other interests are likely to fight back with the argument that the costs will be passed on to beneficiaries.
The proposal is similar to one offered in 1994, the last time Congress tried to deliver a massive healthcare overhaul, said a second Finance Committee source also not authorized to speak on the record. Under that proposal, the tax would have been levied on insurance plans that cost more than average in a given region of the country; it would have applied only to the difference between the expensive plan’s price tag and the regional average.
For example, if a Boston insurer sold a family plan that cost $17,000 and the average cost of a family plan in New England was $14,000, the insurance company would be taxed on the $3,000 difference for each beneficiary who bought a plan at that price. The tax rate would be set by Congress.
Democratic leaders in Congress are struggling to find a way to pay for the healthcare expansion, as moderate Democrats express qualms about its high costs and as Republicans step up attacks.
© Copyright 2009 Globe Newspaper Company.
