Employer-sponsored health insurance is a tax free benefit, which is a major reason that health insurance is tied to employment in this country. That may be change, because the bipartisan tax-overhaul commission is about to recommend limits on that deduction.
According to the Wall St. Journal (Bush Tax Panel Targets Mortgages),
If the commission moves toward recommending a ceiling on employer-provided health insurance, it could affect only the most generous health plans. Panel member Timothy J. Muris… suggested that the ceiling should be around $11,000 for family coverage… A tax would be applied on the amount over the agreed ceiling.
According to a September survey by the Kaiser Family Foundation, the annual premium for covering a family was about $10,800.
That sounds reassuring, but if health care costs continue to rise at 10% per year, that $10,800 will become $25,500 in 10 years. The ceiling for the Alternative Minimum Tax (AMT) isn’t indexed for inflation at all –as a result a program that was originally meant to snare the ultrarich now affects the middle class. Even if the health insurance cap is indexed, I can’t imagine it being indexed above the overall cost of living –something like 3%.October 12, 2005