It is still far from clear what the White House’s new strategy to pass health care reform will be in the face of Scott Brown’s election to the Senate. But according to Federal News Radio negotiations between the House and Senate are still ongoing, including this victory for House Democrats:
Federal employees covered under some of the more expensive plans in the Federal Employees Heath Benefit Program now have some breathing room as well.
Federal workers had been left out of an earlier compromise on health care reform shielding union workers from a proposed 40-percent excise tax until 2018.
The office of Rep. Gerald Connolly (D-Va.) says he “personally called the White House to express his concern of leaving federal employees out of the deal.” An agreement reached Wednesday extends the exemption to federal employees through 2018 as well.
The Senate bill’s health insurance excise tax is terrible public policy. Although the insurance companies would technically make the tax payment (a 40% levy on insurance plans worth more than $8,000 a year for individuals) they would undoubtedly pass this cost along to employers purchasing the plans for their workers in the form of higher premiums. Employers, in turn, would pass that cost on to their workers by lowering other forms of compensation like wages. Once the excise tax is passed on to workers, the result is no different than an increase in their income taxes. Faced with the possibility of paying substantially higher taxes, many workers would logically look for ways to avoid the tax. The first way they could avoid it would be by reducing the value of their health benefits below the threshold. If workers take less expensive health care coverage, they would want higher wages so as not to experience a reduction in total compensation. But this would not allow them to escape higher taxes completely, since higher wages would also be taxed.
Instead of facing this mess, Congress has reportedly chosen to exempt federal workers … which last time we checked included Members of Congress.
Does marriage provide health benefits? According to the research, it does, but not according to many in Congress. Under the Senate-passed health care bill, couples who choose to wed, or to remain wedded, will face financial penalties cohabiting couples will be spared, even if a married couple makes the exact same combined income as a cohabiting couple.
Robert Rector explains that the “anti-marriage discrimination” found in the Senate bill is due to married couples’ income being counted jointly, reducing the amount of subsidies they can receive for health care. For example, assuming that neither Ben nor Beth, age 20, receives employer health insurance, and each makes $20,000 for a combined income of $40,000, Ben and Beth will receive the same total subsidy that an individual making $40,000 would receive. On the other hand, if Ben and Beth choose to cohabit instead, their incomes would be counted separately and each would receive the subsidy that a person making only $20,000 a year would receive. The difference in this case amounts to $4,317 a year.
While marriage penalties exist for younger couples like Ben and Beth, the penalties are even greater for husbands and wives in their later, empty-nester years, especially those who are middle-class. For some couples, this penalty could exceed $10,000 per year. However, even lower-income couples would be hit. For example, a 60-year-old couple with a joint income of $30,000 (each making $15,000), would receive $4,000 less per year than their cohabiting counterparts.
One Democratic Senate Finance Committee aide said, “The Finance Committee, along with other committees in the Senate, took pains to craft the most equitable overall structure possible, and that’s what we have here,” despite acknowledging the marriage penalty. Essentially, the Senate has decided that singles and cohabiters should receive preferential treatment over married couples. Considering the benefits to adults, children, and society that marriage generally brings, the government would be both wise and frugal to promote this institution, instead of discourage it. However, this would be only the newest government program to penalize people for tying the knot. Welfare programs, such as food stamps and Medicaid, include marriage disincentives as well.
While the Senate version of the health care bill will not punish all married couples, those without employer-sponsored health insurance—exactly the people a government health care plan is targeting—and those without children, such as young couples and empty-nesters, will more than likely be negatively affected. In some cases, the penalty will be quite significant. Someone should remind Congress that a bill meant to promote the health of the nation should not include harming the societal institution most likely to promote good health.