His proposal would essentially offer a standard deduction for the purchase of health insurance to those who aren't covered by a work-based plan, according to published reports on a briefing with a senior administration official. The deduction would be worth $7,500 for individuals and $15,000 for families. Currently, for most people who buy coverage on their own, there is no tax break on their premiums.
Those same caps ($7,500/$15,000) would apply to the amount of tax-free money workers may use to buy health insurance at work. Currently, employers and workers share the cost of premiums, and any money used to pay for them is treated as tax-free to the worker, regardless of the cost of the plan.
Tax-free employer contributions to medical insurance premiums and medical care is the No. 1 revenue loser among all federal tax breaks available to individuals.
The cost of the president's proposal would be offset by other tax changes, the senior administration official told reporters, according to Reuters. But there was no indication what those changes would be.
Bottom line: Potentially, the move would make health insurance more affordable for many uninsured Americans, who number more than 45 million.
And it may provide a tax break for those who are covered at work, if their plans cost less than the cap. In other words, if your family coverage costs $12,000, you can still take the full $15,000 on your tax return.
But those who already have health insurance through their employers might see their taxes go up if their plans cost more than the cap set on the health tax break.
As with any tax proposal, though, the real bottom line can't be known until the details are hammered out.
Sources: Brookings Institution, Heritage Foundation, Stanford Group, Employee Benefit Research Institute, Kaiser Family Foundation, Tax Foundation, Cato Institute
