Health-benefit Tax Being Weighed

Posted: April 27, 1991

WASHINGTON — The Bush administration is considering a tax on workers' health benefits to finance medical coverage for the more than 30 million uninsured Americans, Louis W. Sullivan, health and human services secretary, says.

The approach, which Sullivan refers to as a "tax cap," would subject employer-paid health benefits above a certain dollar amount to tax as personal income.

"We are looking at a number of strategies, such as a 'tax cap' on employer-provided health care to provide funds for those who don't have (insurance)," Sullivan told the House Ways and Means Committee on Thursday.

Though Sullivan was careful to say that all health-care policy options are open and no decisions have been made, a Senate Republican health-policy task force is considering a "tax cap" approach to address the problem of the uninsured. The task force is expected to announce a proposal within a few weeks.

Here's how it would work: The government would set a cap on the amount of employer-paid health insurance premiums that would continue to be tax free. For example, if the "tax cap " were set at $1,200 for a single worker, a worker whose employer paid $1,300 in health-insurance premiums would be taxed on the additional $100. The cap would be higher for married workers to reflect the additional cost of family health coverage.

Currently, the employer's share of a worker's health-plan premiums is not counted as income to the worker. Sullivan said that represents $56 billion a year in forgone tax revenue.

Nationally, the average employer contribution to workers' health insurance is $1,400 for a single employee and $3,200 for family coverage. Organized labor has blocked previous efforts to tax health-care fringe benefits.

Sullivan appeared before the committee to answer criticism about the administration's silence on the problems of the lack of access to health care and runaway costs. Rep. Dan Rostenkowski (D., Ill.), chairman of the committee, has made health-care reform the year's top priority.

Rostenkowski said the committee would offer a reform package later this year, and he urged Sullivan to prod the administration to act. White House aides have said privately that they consider health-care reform an issue for President Bush's second term.

"The health train is in the station getting ready to move," said Rostenkowski. "It would be so much help to us if the administration would stake out a position."

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