Most employer-provided health benefits would not be taxed, White House says

September 07, 1993|By Los Angeles Times

WASHINGTON -- White House officials say that most existing employer-provided health benefits would not be taxed as personal income under President Clinton's health care reform agenda.

Health planners had considered imposing taxes on company health benefits that exceeded those specified under the proposed plan, a step certain to draw opposition from workers with generous benefits.

Instead, additional benefits in place as of last Jan. 1 will be exempt from taxes -- provided the employer registers for the exemption with the Internal Revenue Service, Kevin Anderson, a White House health care spokesman, said yesterday.

The exemptions would remain for eight to 10 years. By then, the standard benefits package will have expanded to include most services Americans now have, such as adult dental care, which initially is not in the government plan, senior administration officials said.

Thus, they insisted, most Americans would never have to pay income tax on most of the medical benefits they now enjoy.

But employees would be taxed for higher-level benefits added since Jan. 1. Company plans established after that date presumably also would not be eligible for the exemption.

Administration officials yesterday insisted that the new income tax provision is intended not as a revenue-raiser so much as a "principle" to instill greater cost-consciousness among consumers.

Under current law, employers are allowed to take a full tax deduction for every dollar they contribute toward employee health insurance costs. Mr. Clinton will retain that provision, senior administration officials said yesterday.

Also under current law, all health benefits that workers receive from employers are not counted as personal income and therefore not subject to taxation. But Mr. Clinton intends to end this exclusion as part of his comprehensive health care reform agenda, although with important exceptions, such as the one announced yesterday.

Labor contracts derived from collective bargaining also will be exempt from the tax for eight to 10 years, administration officials said over the weekend.

Senior Clinton aides have said the president intends to propose phasing in universal coverage by the end of 1997, although he plans to include various financial incentives to encourage states to enter the new health care system by 1996.

Starting today, Mr. Clinton is expected to consult with members of Congress and assorted interest groups on the near-final details of his agenda, a process expected to continue up to the time he delivers his proposals in a speech to a joint session of Congress the week of Sept. 20. About two weeks after that, he will submit detailed legislation to Congress, aides said.

Among the decisions still facing the president is whether the government should pick up the cost of covering middle- and low-income retirees who have not reached age 65, when they would become eligible for Medicare. That cost could be as high as $10 billion a year.

But a senior White House official said last night that the issue is "not resolved" largely because of continuing discussions over the amount the government should charge companies most likely to benefit from publicly funded coverage.

According to administration calculations, the nationally guaranteed benefits package will cost, in 1994 dollars, an average of $1,800 for individuals and $4,200 for families, allowing for regional variations.

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