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    Updated May 20, 2008

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AEA Healthcare Update

June 2008 Update

Senator McCain Backs Free Market Solution to Health Care Reform Targets Employer Based Coverage

By Jack Goldstein

On campaign stops in Florida and Pennsylvania in April, Senator John McCain fleshed out some of his proposals for National health care reform. The presumptive Republican presidential candidate proposed a sweeping challenge to employer based insurance coverage that would affect the 71 percent of Americans who currently get their insurance in the workplace. Central to his proposal are the following.

  • Health care benefits would be treated as wages and taxed as income producing an estimated 212 billion dollars in new taxes.
  • Individuals would be given $2500 and families a $5000 income tax credit to offset the higher taxable income if they remain insured through their employers or against the cost of private insurance.
  • Insurance companies would be able to do business across state lines.

The avowed intention of the plan is to move more Americans out of employer-based health care plans into the private insurance market as individuals. Supporters of free market reform maintain that with more people in the marketplace shopping for coverage, and fewer regulations governing the industry, insurance companies will become more competitive and hence the cost of insurance will come down.

By taxing health care benefits as wages, the McCain plan would also eliminate the corporate tax deduction businesses currently take for insurance expenses and hence remove the major incentive companies have for offering such benefits. The impact could be wide spread throughout the American economy, forcing millions of employees to seek coverage in the private market. The plan would potentially result in the proliferation of new insurance companies and increase the number of policies. That, some analysts say, would bring the price of insurance down through competition while others say it would only further benefit an industry whose need for profits many already see as a major inflationary factor in the cost of premiums

Other concerns with the McCain plan focus on insurance regulations and the possibility of increased medical discrimination as more individuals face off against insurance companies and those companies are allowed to do business across state lines. Most employer based plans cannot discriminate against individuals with pre-existing conditions while in many states insurance companies may refuse to cover such individuals seeking coverage. Insurers could be encouraged to relocate to states with weak insurance regulations, and many of those who most need insurance will be less likely to find it.

The McCain plan reflects the basic principles of a market driven approach to the health care crisis. While it is unclear how much of his proposal would be able to pass Congressional or voter muster, it does signal the Senator's strong willingness to work through an expanding private insurance industry to solve the Nation's health care ills.

This column will report briefly on the health care proposal of the presumptive Democratic candidate in the next issue. .

Past AEA Healthcare Updates...

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