Ed Gillespie, the Republican candidate for the U.S. Senate from Virginia has proposed a substantive plan to reform U.S. health care. The Washington Post called it “the most sensible GOP alternative.” An economic consulting firm estimates the plan, which was developed by the 2017 Project, would reduce the federal deficit by $1.13 trillion over 10 years.
There is significant overlap between the 2017 Project’s proposal and the NCPA’s: They both rely on individual tax credits for individually-purchased insurance as a building block for a new, consumer-driven health system.
The 2017 Project’s proposal would give adults under 35 years of age a tax credit of $1,200 a year; those between 35-49 years would get $2,100; and those 50 or older would get $3,000. Those with children would get an additional $900 per child. Those who can buy health insurance for a lower premium can deposit the leftover tax credit in a Health Savings Account.
However, these tax credits would only be available to employees of firms with fewer than 50 full-time equivalent employees. Those in larger firms, who remain in the employer-based market, would retain non-taxable health benefits, up to a limit. However, the tax exclusion would be capped at the 75th percentile of annual premiums. The value of benefits above this cap would be taxable to the employee. (In 2014, the average premium for single coverage in employer-based benefits is estimated to be $6,223. Let’s say that the 75th percentile is $4,667. So, if a person has coverage worth $6,000, $1,333 of that would be taxable.)
The NCPA’s proposed reform, on the other hand, gives everyone a tax credit and includes all employer-based health benefits in taxable income. The 2017 Project’s alternative is more politically palatable because it does not appear to threaten employer-based benefits. (In fact, the NCPA’s alternative does not prevent employers from offering benefits either.) Like the NCPA’s reform, it restores medical underwriting.
Read More » »