Second medical insurance opinions

Following the official debut of Dubya’s health care proposal last night in his State of the Union address, the White House has released additional details on the plan.

The key component is that folks with medical coverage via work would see the value of their employer-paid insurance show up as a taxable benefit. That means the IRS would want more money from you even
though you didn’t actually see any more cash in your paycheck. But you’d get a sizeable tax deduction which should, for most folks, cover most of the cost.

That deduction would be increased annually for inflation. There’s just one problem. Medical costs have been going up two, three, many more times the inflation rate for the last few years, so this deduction could become meaningless if it stayed pegged to inflation.

A lot of folks say that by providing tax breaks for everyone to buy their own health care coverage, the prez’s plan would be the death knell for employer-sponsored medical insurance. Personally, I would love to see health care coverage uncoupled from the workplace.

Sure, it can be a great benefit, but it often is also a golden handcuff. I know lots of people who stay at jobs they hate just because other workplaces have worse or no medical benefits. This is no way to keep employees. Sure, you have fannies in the cubicles, but are they the most productive staff available? No. They are just there because they have kids that need vaccinations or the spouse is on hypertension medication and they need the coverage.

If they had health care coverage from another source, they could go out there and work for the places that really appealed to them. Or start their own companies. Employers and employees would be happier.

Quest for coverage: I know how hard it can be to let go of the company’s medical plan. When I decided to start my own business in 2005, the hubby and I were covered by COBRA from my prior employer’s insurance. It was incredibly expensive, but since it was my policy and he was covered under it and I continued it as I began my new self-employment career, I at least got to write off the costs.

We stayed with it probably longer than we should have, given the cost, but to be honest, it was difficult finding a replacement policy. Because of some chronic but minor ailments, both in my and my doctors’ opinions, insurance companies did not want to cover me.

I discovered that HIPAA, the federal law that guarantees you continued coverage if you had prior on-the-job insurance, applies only to other group (i.e., workplace) insurance. There’s no such assurance if you’re looking to self-insure.

I finally located a couple of companies that would write me a policy. But it was an annoying, frustrating, time-consuming, infuriating and sometimes humiliating process. It was one, however, that had to be done, since with the cost of of medical care nowadays, there’s no way the hubby and I want to take a chance on going without. You’ve heard that horrible prediction: Most of us are just one medical emergency away from bankruptcy.

Anyway, the whole experience has only reinforced my belief that work and medical care need to be separated. Now what’s the best way to provide that coverage if not on the job? I wish I knew. If I did, I’d be running the world.

I’m not sure Dubya’s is the route to take either, but at least he’s getting involved. And while his plan realistically won’t go anywhere, at least not in its original form, it’s a starting point for people to discuss how to treat that 800 pound gorilla in the middle of the doctor’s waiting room.

Speaking of conversation, here are some comments on Dubya’s plan:

• TaxProf reports that the plan’s origins are from his now-forgotten Tax Reform Panel. Here is the section of the Panel’s report dealing with health care (it starts at the bottom of the first page of the PDF file).
• ConsumersUnion.com takes a dim view of the proposal.
• Forbes.com says some insurance companies would benefit from the plan.
• And this EBRI Issue Brief from last June, while not specifically addressing Dubya’s plan, discusses its key feature, limitation of the tax exclusion for health benefits.

Enjoy and stay well!