Tax on high value insurance plans

Here is NY Times article discussing Senate discussion about this. Interestingly, Snowe is quite clear about saying subsidies need to be higher....doesn't sound like someone who has bailed long term...and the longer she holds out, the more powerful she gets.

Also, the tax on high value insurance policies NEEDS to be passed on to consumers so they won't remain over-insured. If you want more health insurance, you need to pay for it. The problem with the current approach (current since World War II) is that the tax code allows unlimited tax subsidy of employer paid insurance premiums. It is an upside down subsidy, whereby the uninsured get none of it (because they don't have employer paid premiums) while people with higher incomes get most of it. The sidebar by Jon Gruber in the NEJM is a good overview of how it works.

The Baucus bill addresses the uninsured with Medicaid expansions and subsidies to purchase insurance. It will address some of the under-insured, who are disproportionately in small businesses. And by limiting the unlimited subsidy of employer paid insurance premiums (via the high value tax) it does something to lessen the problem of over-insurance. This tax should be expanded downward to the mean value of plans, or preferably, just be direct and cap the tax exclusion at the mean ($13,000 family cover; $5,000 individual). The money raised by this....about twice as much as the high value tax should be put into expanding subsidies between 133%-400% of poverty. Doing it this way would maintain the deficit reducing nature of the overall bill.