GOP Quietly Alters Its Obamacare Alternative To Scrap Huge Tax Hike

27 March 2012 Ð Washington, D.C. Ð Protestors for and against President Barack ObamaÕs healthcare reform law rally in front of the Supreme Court building in downtown Washington. The court is currently hearing test... 27 March 2012 Ð Washington, D.C. Ð Protestors for and against President Barack ObamaÕs healthcare reform law rally in front of the Supreme Court building in downtown Washington. The court is currently hearing testimony on the legality of the law and will rule on its constitutionality in June. Photo Credit: Kristoffer Tripplaar/ Sipa USA MORE LESS
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It appears that the Senate Republicans who put forward their own alternative to Obamacare have quietly refined their proposal, undoing what would have been a significant tax increase on most Americans.

The apparent change centers on the plan’s tax treatment of health insurance. Right now, health insurance contributions by employees and their employers are not taxed; the GOP wanted to include a cap on how much of those contributions can remain untaxed.

But the devil is in the details. The original eight-page proposal released by the Senate Republicans — Richard Burr of North Carolina, Tom Coburn of Oklahoma, and Orrin Hatch of Utah — said that the new cap would be “65 percent of an average plan’s costs.” Health policy experts told TPM that this would likely result in a big tax increase on most Americans and some would probably lose their insurance.

“It’s obviously a substantial increase on people who get employer-sponsored insurance,” Gary Claxton, vice president at the non-partisan Kaiser Family Foundation, told TPM of the original proposal. “This would be a meaningful hit on people. It’s a big radical change. This is not an incremental thing, and it affects most people under 65.”

The Congressional Budget Office recently analyzed a similar, though not identical, proposal and estimated that it would raise $613 billion in revenue over nine years, while six million people would lose their employer coverage in the five years after it took effect.

The initial reporting on the GOP’s new proposal, by the Washington Post and National Journal as well as TPM, highlighted that the plan would likely lead to many Americans paying more for their insurance. National Journal observed that, under the GOP’s plan as originally proposed, if you had an average health plan, you’d pay taxes on 35 percent of its costs.

It seems the Senate Republicans noticed this problem — a significant tax increase on average Americans isn’t likely to be a winner when the GOP has spent years decrying Obamacare’s impact on the middle class — and changed the proposal’s specifics accordingly. Or they realized how poorly they worded the original proposal and sought to clarify their intentions. It’s impossible to say, and their offices declined to explain.

Some time after the original proposal was released Monday, a new one-page explainer on the tax provisions appeared on Coburn’s website, below the link to the original proposal. And it included a huge change. The cap would now be “65 percent of the average market price for an expensive high-option plan” instead of just “an average plan’s costs,” as the original proposal said. The language in the original eight-page proposal had not been changed as of Thursday evening.

What that change would mean exactly in terms of employer coverage and revenue is impossible to know without specific legislative language, which isn’t yet available. But it would reduce the tax impact for most Americans, compared to the original proposal, by significantly raising the threshold for when you start paying taxes on your insurance contributions.

TPM retrieved an older version of Sen. Tom Coburn’s web page with a link to the original eight-page summary, which was released Monday, and it did not include a link to any additional explainer on the tax changes. The new explainer seems to have appeared on Coburn’s website some time on Wednesday.

Republican staff for the Senate Finance Committee, where Hatch is the Republican ranking member and which directed TPM to Coburn’s website as the “hub” for information on the new plan, did not deny that a new explainer had been added after the original proposal had already been released.

But they declined to comment specifically on the apparent alterations to the plan’s tax provisions reflected in the new explainer. Coburn’s office did not return multiple requests for comment on the proposal’s tax provisions.

“We’re continuing to build on our resources and information for the (plan), as we get feedback and questions on the blueprint,” Julia Lawless, a spokeswoman for Hatch, told TPM in an email. “As we move along, I imagine we’ll build out more.”

“Maybe some realized what 65 percent of the average plan would mean,” Claxton told TPM after being notified of the change.

Regardless, the episode is a microcosm of the difficulty of reforming the U.S. health insurance system, a struggle that has ensnared Republicans as they’ve searched for an Obamacare alternative in the years since the law passed.

Before and After screenshots of the tax treatment language are below.



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