- The Washington Times - Wednesday, July 29, 2009

A proposal to tax health insurance companies who offer the most expensive coverage plans is gathering support in a key Senate panel as a way to pay for a portion of the health care reform bill.

Sen. John Kerry, Massachusetts Democrat, has put together a proposal to tax the companies that offer so-called “gold-plated” insurance plans.

A bipartisan group of six senators on the Finance Committee has been struggling to come up with a way to pay for its health reform plan, which is expected to be priced at about $1 trillion. The group reached tentative agreement on two other policy issues late Monday, but members refused to identify them for fear of destroying the compromise.

Many on the panel had supported putting a cap on the tax-free status of employer-provided benefits, but that idea was rejected by President Obama, who opposed a similar plan by Sen. John McCain during the presidential campaign. That left a $320 billion hole in their bill.

The idea from Mr. Kerry would tax the insurer instead of the purchaser, which so far seems to be the key to acquiring more political support.

Mr. Obama and lawmakers on Capitol Hill said they’re intrigued by the idea and didn’t immediately knock it down.

Sen. Olympia J. Snowe, Maine Republican and one of the six on the Finance Committee negotiating a plan, said the idea has “potential.”

“We’re interested in it, not for the sole reason of raising money, although it would do that,” Sen. Charles E. Grassley, Iowa Republican and chief GOP negotiator on health care, told Bloomberg. “We’re interested in it as a discipline within health care.”

Health care analysts say the proposal is politically viable in part because it gives lawmakers a way around the House’s proposal to apply a surtax on wealthy Americans.

“There’s a certain appeal to it,” said Lewis J. Hoch, partner at Blank Rome LLP in Philadelphia. “I think a proposal which has the benefit of generating revenue and furthering the ends of health care reform is a win-win.”

The idea is that the most expensive insurance plans drive up health care costs because consumers don’t realize the true cost of the health care services they use.

The tax “would have the further benefits of encouraging people to use programs that are cost-effective, efficient and emphasize what is the goal in the health care initiative - cost,” Mr. Hoch said.

The proposed tax would apply to insurance plans over a certain threshold, which at least one senator on the Finance Committee said could be about $20,000 to $25,000 - about twice the value of the average family plan. If a plan is valued over that amount, the tax would apply to the portion of the premium above it. The value of the plan would be based on the entire premium, not just the employer-provided portion.

The tax rate being considered is between 20 percent and 35 percent.

The proposal is similar to an amendment that then-Sens. Bill Bradley, New Jersey Democrat, and John Danforth, Missouri Republican, offered in 1994 in the Finance Committee when it was considering health care reform.

Critics of the plan say health insurers would merely pass the tax onto consumers in the form of higher rates.

“New taxes on health care coverage are going to make coverage less affordable for families and small businesses across the country,” said Robert Zirkelbach, spokesman for America’s Health Insurance Programs.

Meanwhile Tuesday, House Democrats looked to patch together a compromise with the fiscally conservative Blue Dog Coalition, which has threatened to hold up the bill until it got greater price controls and a new public-option structure.

Neither the House nor the Senate is expected to pass legislation before Congress’ August break, a deadline Mr. Obama set months ago. The House leadership is hoping to have a deal in the Energy and Commerce Committee before members leave Friday. Senate Majority Leader Harry Reid said he’s expecting the Finance Committee to report out a bill before leaving a week from Friday.

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