Talent Management - October 2008 - (Page 30)

recruitment & retention assessment & evaluation compensation & beneﬁts performance management learning & development succession planning Neither federal income tax nor payroll taxes — such as Social Security and Medicare — apply. Economists who favor repeal of the tax exclusion, including those who are advising McCain, argue an unlimited tax exclusion raises the cost of health coverage by encouraging generous beneﬁt plans to which medical providers can increasingly charge higher prices. – Sen. John McCain They argue one of the effects of this cycle is some consumers are priced out of affordable insurBeneﬁts Program (FEHBP). His proposal also would reance, resulting in more uninsured individuals. quire all children have health care coverage and would “Bringing costs under control is the only way to stop the erosion of affordable health insurance, save Medicare and Medicaid, protect private health beneﬁts for retirees and allow our companies to effectively compete around the world. allow young people up to age 25 to continue coverage through their parents’ plans. To provide Americans with additional options, the Obama plan would establish a National Health Insurance Exchange to help individuals who wish to purchase a private insurance plan. Through the Exchange, any individual could enroll in a new public plan or purchase an approved private plan, with income-based federal subsidies for those who need them. Insurers would have to issue every applicant a policy with community-rated premiums. The Exchange would require that all the plans offered be at least as generous as the new public plan — with FEHBP-like beneﬁts — and meet the same standards for quality and efﬁciency. Insurers would be required to justify an above-average premium increase to the Exchange. The Exchange would evaluate plans and make the differences among the participating plans transparent — including the cost of services. Obama’s health care plan also proposes to lower health insurance premiums by having the federal government assume a portion of the costs for high-cost cases, in effect lowering the risk of catastrophic costs that now fall on insurers, self-insured employers and individuals. Tax Treatment of Health Insurance Many health economists argue the current federal tax law provision, which excludes the value of employer-provided health insurance from an employee’s taxable income, has contributed to the rising cost of health coverage. Under current tax provisions, employees receiving health coverage from an employer plan may pay for their portion of premiums with pretax contributions and receive the value of the health coverage provided by the employer tax free. McCain proposes to create a level playing ﬁeld in the individual and group health insurance markets by equalizing the tax incentives for individuals who buy health insurance coverage on their own with those tax incentives available for individuals who get their coverage through an employer plan. To do that, McCain would replace the current, unlimited tax exclusion for employer-provided health care coverage with a tax credit available to all individuals, in the amount of $2,500 for individuals and $5,000 for families. Pretax employee contributions and health care ﬂexible spending arrangements (FSAs) would conceivably be eliminated under this approach. The change in tax treatment also means an employee could go outside the employer health plan and receive the same tax beneﬁt for buying individual coverage. An employee could still take advantage of the tax credit to pay for employer-provided coverage, but the value of any employer beneﬁts in excess of the $2,500/$5,000 tax credit would be subject to federal income and payroll taxes. The tax revenue generated by eliminating the current exclusion is intended to offset the cost of providing the tax credits. But it would probably result in winners and losers. According to the Kaiser Family Foundation, in 2007, the average total cost of employer-sponsored health insurance coverage was $4,479 for single coverage and $12,106 for family coverage — well above the amount of the proposed tax credit. “The U.S. spends over $2 trillion on medical care every year and offers the best medical technology in the world. Yet, the beneﬁts of the American health care system come at a price that an increasing number of individuals and families, employers and employees, and public and private providers cannot afford.” – Sen. Barack Obama 30 October 2008 talent management magazine www.talentmgt.com http://www.talentmgt.com

Table of Contents Feed for the Digital Edition of Talent Management - October 2008

Talent Management - October 2008 Editor’s Letter Contents Human Performance Leading Edge Foundations The Three Pillars of Executive On-Boarding Role-Based Assessment: Thinking Inside the Box Who's Going to Speak Up for Health Care? Obey the Push to Automate Managing the Star Performer No One Wants to Work With Adopting a Mutual-Funds Model for Talent Management Hewlett-Packard: Simple Talent Management in a Technical World Team Effort Pays in Talent at London Business School The Employee Survey: What’s in It for Me? Why Most Managers Are Stuck Advertisers’ Index Editorial Resources Full Potential

Talent Management - October 2008

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