Health ins and taxes

[mattpegher]

I had an idea and was wondering if anyone has explored this idea. Currently if you pay for health insurance it comes out pretax so you get back about 1/3. What if we made it a tax credit so you got back all of it. Maybe make it up to a certain amount. The rest would still come off of gross but that would make it a no lose proposition to buy insurance. Sure we would have to raise the rest to maintain revenue but if you don't get insurance you have to pay the government anyway.

What do you guys think? Has anyone considered this yet?

 

[dullard]

I've said that for years. Make it a tax credit (equal to the cost of high-deductable basic health insurance), then the only people without insurance would be morons, illegals, and those who cheat on taxes. End free emergency room care (since legal Americans almost all have insurance) and problems are solved. Those who want more than the basic coverage can buy more if they choose but that will be on their own dime.

Our system now is similar. Buy insurance or get a fee. But the fee is far too small to be an effective stick.

 

[FoBoT]

or maybe we should stop subsidizing the health care industry completely so they don't have an artificial floor inflating the prices at several times the core inflation rate

 

[mattpegher]

My employer gives full time employees a stipend monthly to use for insurance. They offer like 6 different plans and I can choose to spend more or if I spend less I get it in taxed wages. I choose to use a "facility only high deductable" plan which has a $5000 deductable but costs $7000 less per year. I put 5k of the 7 in an HSA so I dont get hit with the deductable (dont lose it at the end of the year either). If I don't use it I spend it on prescriptions, dental and optometry.

Sure everyones situation is different but I think this saves a bunch.

 

[dullard]

I put 5k of the 7 in an HSA so I dont get hit with the deductable (dont lose it at the end of the year either). If I don't use it I spend it on prescriptions, dental and optometry.

Sure everyones situation is different but I think this saves a bunch.

If you can possibly afford to do so, I'd make a couple of changes.
1) Put in $6150/year instead of just $5000. You still have time to do that now before the end of the year.

2) Don't just spend it up on prescriptions, dental and optometry unless they are truely needed.

Why? Because that HSA is the United State's finest retirement savings plan. It has all the advantages of the Roth or IRA. But, you aren't income limited like an IRA or a Roth. You can put more in it than the IRA or Roth as long as you have a family. And you can withdraw from it at will once you retire (unlike the IRA) or at any age as long as you have a medical expense (unlike the Roth). Plus, in certain cases it can put you into a lower tax bracket, allow other deductions if your income was too high, etc.

But, if you just spend it willy nilly at the end of the year, you lose most of those benefits.

 

[mattpegher]

If you can possibly afford to do so, I'd make a couple of changes.
1) Put in $6150/year instead of just $5000. You still have time to do that now before the end of the year.

2) Don't just spend it up on prescriptions, dental and optometry unless they are truely needed.

Why? Because that HSA is the United State's finest retirement savings plan. It has all the advantages of the Roth or IRA. But, you aren't income limited like an IRA or a Roth. You can put more in it than the IRA or Roth as long as you have a family. And you can withdraw from it at will once you retire (unlike the IRA) or at any age as long as you have a medical expense (unlike the Roth). Plus, in certain cases it can put you into a lower tax bracket, allow other deductions if your income was too high, etc.

But, if you just spend it willy nilly at the end of the year, you lose most of those benefits.

Not a bad idea.

 

[highland145]

snip

Something in the back of my mind says Obamacare cuts back on or off HSA contributions after 2014. Know anything about this?

 

[JulesMaximus]

I've said that for years. Make it a tax credit (equal to the cost of high-deductable basic health insurance), then the only people without insurance would be morons, illegals, and those who cheat on taxes. End free emergency room care (since legal Americans almost all have insurance) and problems are solved. Those who want more than the basic coverage can buy more if they choose but that will be on their own dime.

Our system now is similar. Buy insurance or get a fee. But the fee is far too small to be an effective stick.

Emergency room care is not free now.:whiste:

 

[manlymatt83]

I had an idea and was wondering if anyone has explored this idea. Currently if you pay for health insurance it comes out pretax so you get back about 1/3. What if we made it a tax credit so you got back all of it. Maybe make it up to a certain amount. The rest would still come off of gross but that would make it a no lose proposition to buy insurance. Sure we would have to raise the rest to maintain revenue but if you don't get insurance you have to pay the government anyway.

What do you guys think? Has anyone considered this yet?

Or how about we just make a dollar for dollar tax credit for *anything* normally tax deductible: donations to non profits, health insurance purchase, etc. I like that better.

 

[mattpegher]

Or how about we just make a dollar for dollar tax credit for *anything* normally tax deductible: donations to non profits, health insurance purchase, etc. I like that better.

Well anything the government wants to encourage us to do. Donations might be a good idea but you would have to put a limit on the amount or else the revenues would have to be obtained elsewhere. We would have to put max allowances for the tax credit afterwhich the remainder could be deducted from gross. The tax credit limit could be gradiated by income but I wouldnt start decreasing the limit until after 100K. (I make more than this) So the poor and the middleclass would benefit more than the rich.

I figure that a family plan currently costs about 16K/year, so we may need to roll this out gradually. If everyone had coverage, I imagine the premiums might deflate.
Ultimately it could have some regulatory effect on the insurance industry because they would know that the working poor can afford some HMO that costs say 10K/year and they would offer one.

 

[mattpegher]

Any negative impacts?

1. less revenue- will need to get from us somewhere else to maintain current budget.
2. I wonder if the insurance industry would influence the govt enough to capitalize on this.
3. If your employer pays the bill who gets the tax credit.

Any others?

 

[dullard]

Something in the back of my mind says Obamacare cuts back on or off HSA contributions after 2014. Know anything about this?

All I could find was that starting in 2014 there will be a panel that sets minimum required coverage for a person with an HSA so that the insurance portion covers 60% of the costs and the person covers 40% of the cost in the typical situation. But even that was vague.