Senate Proposal Would Take Health Care Burden Off Employers

May 2, 2008 ( - Unlike other proposals for universal health care that require employers to offer health insurance for employees and penalize them if they don't, a modified proposal by senators based on the Healthy Americans Act would actually phase out employer-sponsored coverage.

A letter from the Congressional Budget Office and the Joint Committee on Taxation says that under the proposal, during the first two years of the program, expected to be implemented by 2012, employers who offer health insurance would not owe tax for employees enrolled in an employer plan. During this two-year period, employers would “cash-out” their health insurance plans, increasing employee pay by an average cost amount to make up for the loss of the employee benefit.

The proposal provides that universal coverage would be paid for by taxes on individuals and employers. It would require payment for the lowest-cost premium to be part of an individual’s tax liability, and withholding tables would be adjusted to reflect this liability (except that certain low-income individuals would be eligible for premium assistance). Employers would pay a new tax equal to between 3% and 26% (depending on employer size and revenue per full-time employee) of the national average premium for the minimum benefits package for each employee enrolled in Healthy Americans Private Insurance System (HAPI).

All citizens and permanent residents (with limited exceptions) would be automatically enrolled in a basic minimum benefits package within the HAPI. Coverage above the basic package would be purchased separately by individuals by direct payment to the insurer.

The minimum benefits package is benchmarked to the actuarial value of the Federal Employees Health Benefits (FEHB) Program standard benefit option BlueCross/Blue Shield plan for 2011, according to the letter. Insurers would compete to be the basic insurance provider for each state by submitting bids for premium amounts to a newly-created state-sponsored Health Help Agency (HHA).

As for premiums for the universal health care system, the proposal allows plans to establish up to four different premiums for coverage: single individuals; married couples; married couples with children; and adult individuals with children. Otherwise, premiums would vary only to reflect geography and smoking status, as determined by state regulators.

Under the proposal, no premium subsidy would be available for individuals or families with income equal to or above 400% of the Federal poverty level (FPL). No premium would be required for individual filers (not claimed as dependents) or joint filers with no income tax liability or with income less than or equal to 100% of the FPL. A sliding premium subsidy amount applies for individuals or families with income between 100% and 400% of the FPL.

The Congressional Budget Office and the Joint Committee on Taxation determined that the government’s costs and revenues generated by the program would balance out by 2014.

The modified Senate proposal was made by Senators Ron Wyden (D-Oregon) and Robert F. Bennett (R-Utah), and the letter to them is here .