Most would save under president?s health care proposal

If an employer-provided plan covers you alone, the policy costs just under $2,500 on average, still low enough for a tax cut.

The administration says its proposal would enable more Americans to afford health insurance, reducing the ranks of the uninsured ? now estimated at 46.6 million ? by 5 percent to 10 percent.

The president hit the road Thursday to sell his health care plan, talking it up at a conference in Lee?s Summit, Mo. But it has received a cold response from key Democrats in Congress.

The plan would do two things: For the first time, the cost of an insurance policy would be treated as taxable income. The cost includes both the employer?s and the employee?s payments. The result is that workers? taxable wages would shoot up dramatically.

But, then, the president calls for a standard tax deduction for those who buy health insurance ? $15,000 for family coverage and $7,500 for individual coverage. So, the key to getting a tax cut will be to keep the cost of the policy below the size of the new deduction.

The result of the proposed change would be that, initially, about 80 percent of workers who get insurance through their jobs would be in the camp that gets a tax cut. About 20 percent would see a tax increase.

About 160 million people get health coverage through their employers.

A smaller group of Americans, about 17.8 million, buy health insurance on their own because their job doesn?t provide it or they can?t afford the coverage their employer offers. Almost all of them would experience a substantial tax cut.

That?s because they don?t have a boss fronting the cost of their insurance on a tax-free basis. They pay for it themselves, and get little tax help unless they spend at least 7.5 percent of their adjusted gross income on health care.

Karen Davis, president of the Commonwealth Fund, said the people who buy insurance on their own are typically baby boomers. Of the 12 million adults in the individual market, 40 percent of them make more than $50,000 a year.

They would save, on average, about $2,500 when buying individual coverage, and $5,000 on family coverage, she said.

Just how much one pays or saves depends upon which income tax bracket they?re in. The administration projects the greatest benefit would go to the middle class.

The wealthy tend to have the most expensive policies, and many of them can expect to pay higher taxes. Meanwhile, the poor generally don?t pay any income tax, so the help they get would be limited to lower payroll taxes.

Workers in established manufacturing industries, such as the auto and steel industry, tend to have generous health insurance benefits, so they could see their taxes go up if they stick with their current policy. So could many government workers.