Excerpt: Question 5
A Sick Policy on Health Insurance

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An employee’s health insurance premiums paid at work are exempt from income tax—no matter how deluxe a policy the taxpayer chooses.

Ask the Candidate:

Should the tax exemption for an employee’s health insurance premium paid at work be limited to a premium for a basic policy, and would you deny the tax break to managers if their employers paid more of their premiums than they paid for rank-and-file workers?

Health insurance premiums, which have been rising at double-digit rates and are likely to continue to do so, pose enormous problems for most us. About 44 million Americans have no health insurance at all, including many who are employed. Rank-and-file employees with basic health insurance at work struggle to keep their coverage at a time when their employers insist that they pay an increasing share of the costs.

On the other hand, managers (a term used here to include all highly compensated employees) often select top-of-the-line (let’s call them “deluxe”) policies that offer the most extensive coverage and smallest co-payments, and their employers often foot most, if not all, of the bill.

Any thoughtful lawmaker recognizes the benefits of a healthy society. Aside from wishing fellow citizens well, lawmakers know that healthy children are more likely to have better school attendance and be better students, and healthy adults are more likely to work productively and be able to support themselves and their families and not become a burden on government.

It is easy to understand, therefore, why Congress might adopt a tax break that encourages workers to acquire health insurance. But what is difficult to understand is why Congress has designed the tax break so badly. It gives the most help to the most highly paid employee who buys the most comprehensive policy, and the least help to the low-income worker who needs assistance to buy a basic policy. The tax break also excessively drives up the price of health insurance. The estimated cost to the government over the next five years is a staggering $603 billion. We can’t afford a mistake of this magnitude.