Two pieces of news provide a flicker of hope amid the doom and gloom.
As Obamacare Strengthens the Individual Health Insurance Market, Tax Rules for Employer Coverage Are Still Better
SUNNYVALE, Calif., Aug.21 2013 /PRNewswire-USNewswire/ --Nearly half of Americans surveyed said premiums for health insurance bought in the individual market should be tax-free, just as they are when employers buy it for their workers, according to a new poll from HealthPocket. When asked, "Should consumers' premium payments to buy health insurance be tax-free the same way it is for companies paying for health insurance?" half of respondents (47 percent) answered "Yes, the payments should be tax-free." Only 7 percent said the payments should be taxed.
U.S. Census data from 2010 indicates more than 169 million Americans, or about two-thirds of those with health insurance, are covered by employer-based health plans. Employers face different tax treatment with respect to health insurance premiums compared to Americans buying insurance on their own. Under current tax rules, employers and their workers benefit from this system. Employers deduct health insurance premium payments for workers from their income before they pay tax, and exclude these payments from their employees' taxable income.
By contrast, consumers pay with after-tax dollars when they buy health insurance on their own in the individual market. This means that a consumer in a 33 percent income tax bracket must earn $1.50 in order to have $1.00 to pay for health insurance premiums purchased on the individual market. That consumer has to earn $9,000 in pre-tax dollars to purchase a health insurance plan with a $6,000 annual price tag.
"Right now there is an uneven playing field in terms of tax-free premiums, and the American consumer is at a disadvantage," said Bruce Telkamp, CEO of HealthPocket, a nonpartisan research and insurance comparison website. "With the administration's decision to delay the employer mandate, more employed people will enter a reformed individual market in 2014. They will experience an unfavorable tax environment compared with coverage paid by their employer."
While those buying insurance on their own cannot take advantage of the same tax advantages businesses receive, the self-employed can treat themselves as employers by deducting health insurance premiums from taxable income if: a) they made a profit for the year, and b) the self-employed individual was not eligible to enroll in a health plan provided by a former employer, spouse's employer, or former spouse's employer. For others, privately purchased health insurance is paid with after-tax dollars except for any premium amount that exceeds 10 percent of adjusted gross income for the year.
The nationwide survey was conducted between August 12 and August 15, 2013 and reflects 744 responses. The methodology to acquire survey respondents who approximate national statistics on age, gender, and region was implemented by Google. See the InfoPoll report to review the detailed findings. Consumers can review health insurance options available in the current marketplace for free by using HealthPocket's health insurance comparison tool that compares quality and costs of health plans in any geographic area.
HealthPocket.com is a free website that compares and ranks all health plans available to an individual, family, or small business, so everyone can make their best health plan decision and save on their out of pocket costs. The Company uses only objective data from government, non-profit, and private sources that carry no conditions that might restrict the site from serving as an unbiased resource. The founders of HealthPocket.com spent decades pioneering online access to health insurance information and knew they could offer something different that can positively change how people buy and use healthcare in the U.S. Learn more at www.HealthPocket.com.