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FEHP and the Federal Tax Cap on Health Plans

By Suzanne Kubota

FederalNewsRadio.com

Some federal workers could face a hefty premium hike under one healthcare reform proposal. The bill comes from the Senate Finance Committee. While the tax would be imposed on insurance companies, analysts believe customers would pay for the increase in the form of higher premiums. Rep. Jim Moran (D-VA) told FederalNewsRadio, the problem is in how the cap for the tax is figured out. “Right now, the cap would be fine because the average federal policy is $6,000,” said Moran. “The problem is that they’ve decided to add in dental, vision, as well as the Flexible Spending Accounts, and when you add in the Flexible Spending Accounts, right now, you would get to $7,997 – exactly $8,000,” which is the proposed cap. Under the proposed legislation, once the cap is hit, a forty percent tax kicks in. By the time the tax is implemented, said Moran, “virtually every federal health insurance plan is going to exceed the $8,000 cap. Virtually every plan that has a Flexible Spending Account would be subject to the forty percent tax because they would be over the cap. I don’t think that’s the intent of the proposal, which was to tax high-cost employer sponsored health insurance.” This leaves two options, said Moran: figure out how else to pay for proposed healthcare reforms using other taxes, or simply drop FSAs from the equation. “I’m not trying necessarily to throw out the idea of taxing what they call Cadillac plans,” said Moran, “but I do think that by including FSAs, and thus hitting virtually every federal employee who has an FSA, that it’s going beyond the scope of what they intended to do.” Reps. Moran and Jerry Connolly (D-VA) have sent a letter to House Speaker Nancy Pelosi (D-CA) expressing concern that the Senate health care proposal and its impact on federal employees. Plus, said Moran, there’s the idea of the larger intention of the bill. “We’re trying to get support for the idea of comprehensive health insurance for the nation. I don’t want two million federal employees opposing the idea because they’re paying a forty percent cap if they have a Flexible Spending Account.”

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October 23, 2009 - Posted by | Federal Government, healthcare | , ,

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