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GOP Senators’ New Health Overhaul Plan Would Tax Some Workers’ Benefits

By Mary Agnes Carey

January 28th, 2014, 5:00 AM

A health care overhaul plan released Monday by three Senate Republicans may reveal how the party will handle the issue for the 2014 elections and beyond.

Photo by Karl Eisenhower/KHN

Sens. Orrin Hatch of Utah, Tom Coburn of Oklahoma and Richard Burr of North Carolina unveiled a legislative framework that would scrap much of the 2010 health law, replacing those provisions with ones the lawmakers say will increase consumer choice and reduce health care costs.

“With our plan, we’ve shown once again that by empowering Americans — not Washington — with the right tools and information, they will make the best informed health care decisions for themselves,” Hatch said in a statement.

It would repeal the health law’s requirements on individuals and employers to purchase health care coverage. It would scrap the law’s Medicaid expansion and give states more control of Medicaid, scale back the size of tax credits to help people buy health insurance and scrap the law’s new taxes and fees. It would also eliminate the health insurance marketplaces set up under the federal health law.

Insurers would still be prohibited from imposing lifetime limits on coverage. Plans would be required to offer dependent coverage up to age 26, although a state could opt out of enforcing that provision on the insurers it regulates.

Insurers could charge an older person no more than five times what they charge a younger person — the health law only allows insurers to charge up to three times more to older people — but states could impose rating rules that were more or less restrictive.  Subsidies would be based on age  — not income — and be available to those up to 300 percent of the poverty threshold, not 400 percent as the health law does.

Individuals who maintain continuous coverage could not be charged more for a pre-existing medical condition, but if they have a gap in coverage they could be subject to medical underwriting, where insurers could charge them more for coverage based on their medical history.

The proposal would not change the long-standing practice of allowing employers to fully deduct the cost of providing health insurance. However, some employees getting very generous coverage would have to pay taxes on the value of some benefits. The proposal would cap the tax exclusion for an employee’s health coverage at 65 percent of an average plan’s cost.

“This step is necessary and important, because economists across the political spectrum largely agree that the current distortion in the tax code helps to artificially inflate the growth in health care costs,” according to the Senate GOP blueprint.

Senate GOP aides said the plan’s drafters did not want to discourage employers from offering health insurance, but instead wanted to create pressure from employees to reduce the cost of that coverage.

President Barack Obama’s health law includes a so-called Cadillac tax on plans that cost more than $10,200 for an individual or $27,500 for a family.  In 2018, those plans will incur an excise tax of 40 percent on the amount of the premium that exceeds those thresholds.

Hatch, Coburn and Burr would keep the health law’s Medicare policy changes and its $716 billion in provider cuts on the idea that any discussion of Medicare changes “should be considered in the context of reforms to improve Medicare and improve its insolvency,” according to the proposal.

11 Responses to “GOP Senators’ New Health Overhaul Plan Would Tax Some Workers’ Benefits”

  1. Tino says:

    after all this time, incredible what this plan offers. a total non-starter for serious consideration.

  2. This “faux” plan does nothing to lower the actual costs of care. And, it reveals a stunning lack of understanding as to how the healthcare delivery system actually works for the patients it is supposed to serve.The pitfalls of these “plan” elements will take us backwards.

  3. Tyco Brahe says:

    It took four years for the GOP to cobble together a few pages, a proposal, not a bill. It shows that when the GOP chanted, “Repeal and Replace,” it wasn’t serious about the replace part.

    So much of this is the same as Obamacare. By not having the individual mandate, what will force prices down? What will pay for the proposal…seems like a quickly increasing deficit, just like Medicare Part D does.

    Once again, a bunch of gobbledygook presented by the GOP to bamboozle everyone. Imagine the utter havoc in the country if ACA was replaced with this???

  4. Don Benson says:

    The Affordable Care Act does not lower the cost of health care in this country. A complaint that the GOP plan fails to lower cost does not make their plan inferior to the ACA.

    I firmly believe the best way to “bend the cost curve down” (in the words of President Obama) is to make the consumer (you and me) sensitive to the cost of health care services. The ACA does not do that. It sounds like the GOP plan may.

  5. Sharon Postel says:

    Once again, Kaiser and Drew Altman show you are in the tank for Obama and Obamacare. You skew the headlines and do not show the benefits. Where are the headlines for Obamacare’s health insurance company bailout because people are not ENROLLING (PAYING PREMIUMS) at the Obamacare planned rate? Please just shut down or show photos of Obama instead of KFF or KFN logo so we know your true perspective.

  6. George Perez says:

    The fact that Tino, Jacquelhn and Tyco read only left-wing blogs or newspapers and didn’t bother to research for themselves that Republicans have had alternatives for years, does not mean those alternatives didn’t exist before. Ignorance of something does not make it go away. (Like the first amendment – it’s still there!) Try doing some original research on google for Republican health care plans and become enlightened. Second, since Obamacare increases the cost of medical care and this has already been documented, complaining that the Republican alternative would do the same (without evidence) is not much of an argument at all. Actually, it is meant to incentivize patients to save money, something Obamacare does not do. Third, if you like your doctor, you get to keep your doctor! Something we know that Obamacare does NOT allow you to do. The fact that people are still defending Obamacare and without decent arguments to back it up, just show the knee-jerk reaction partisans have to political issues. Remember, knowledge is the conqueror of ignorance. Try it and learn.

  7. Republicans propose to totally overhaul health care according to their model — if / when they have the majority to do so. Suppose that happens, and healthcare is totally overhauled. Then the next time there’s a Democrat majority do we overhaul it again? Do we go jumping back and forth between two competing health care philosophies for the next 100 years, without ever bothering to refine or fix the missing or broken parts of either party’s health care vision?

    We have a health care reform plan in place. Let’s find the weaknesses in it and correct them. America is drastically, sadly behind the curve compared to other industrialized nations. We trumpet “no more taxes” while we are in reality taxed more for health care than any other place in the world. Taxed by inefficient delivery systems; Taxed by corporate greed and profits; Taxed by government inefficiency; Taxed by malpractice lawsuits; Taxed by flawed incentives.

    We must learn to work together as a nation, or we’ll never catch up to other nations, and never again be competitive as an industrial power. The current level of political conflict – and the way that it fails to resolve the problems – is absurd, and contrary to all our best interests.

  8. DaudM says:

    So now we have the repub plan? How does this lower healthcare cost overall, how does it help those currently uninsured? We still can’t know what is in the re-plan until it is passed. At this point it isn’t a plan to replace O’care just a bunch of ideas cobbled together. 4 years on and still they haven’t passed, Yes passed a plan of their own. They want to keep harping on how they could have done this better with out actually doing anything. Well I’m from Missouri and you need to show my by putting your vote where your mouth is. They have had from at least 1993 when they torpedoed HilaryCare to come up with a plan and they just now come up with this? Repeal and replace is still all about just Repeal. Repubs have no plan.

  9. Jordan says:

    “Subsidies would be based on age — not income”.

    And that makes sense how?!

  10. This package is horrible. It will insurance price and coverage will change depending on your age, sex, etc.

    How can we get these men out of office? They are not serving the American citizens.

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