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ThoughtsOnline

Monday, April 25, 2011


A claim made by those who would tax employer provided health care benefits (either by deeming it income to the employee or disallowing the deduction by the employer) is that ending the current arrangement would give the employee an incentive to shop around for the cheapest coverage.

Huh?

Please point to a single company that currently provides health insurance coverage for its employees that isn't doing everything it can to find the lowest coverage it can?

Even though the benefit isn't taxable to the employee, the cost takes real dollars out of the employer's bank account... which gives the employer a lot of incentive to pay as little as possible.

And... since more and more employees are having to kick in some kind of contribution (often in the form of a share of the premium costs), they too already have a large incentive that the costs be kept as low as possible.

As to the implied suggestion that taxing the employee would result in the employee choosing to forgo coverage benefits, thus reducing the net cost of health insurance coverage, this too doesn't make sense.

While the employee's current coverage may provide coverage for procedures the employee could just as soon do without, if the employee isn't availing himself of those benefits, the employer isn't paying much (if anything) to offer that coverage. Insurance premiums are based on expected usage... and if there is little expectation that a given procedure will be utilized, then the insurance company isn't going to charge much for covering that particular procedure.

It is possible that advocates of taxing insurance benefits think (or hope?) that this would result in lower premium costs as a result of consumers going without coverage for needed procedures... but this would simply shift those costs as people would have to pay for those procedures out of pocket.

Still another possibility is that there are a ton of medically unnecessary care being provided that people would do with... but I really doubt that a whole lot of what is being spent on health care is being spend for such care.

Bottom line, those who call for taxing benefits really don't understand what is going on in with the people whose lives they're trying to regulate...