Baucus Hints at Changes to Health Care Tax Breaks

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WASHINGTON — Changing the tax-favored status of employer-provided health care coverage could make the system fairer, according to Senate Finance Committee Chairman Max Baucus, D-Mont.

As his committee moves closer to considering comprehensive health care reform legislation, Sen. Baucus voiced concerns Tuesday about the current system in which employers can fully deduct group health care premiums as a business expense and the cost of the premiums is excluded from employees' taxable income.

At a Finance Committee hearing, Sen. Baucus said he opposes a total repeal of the health care tax exclusion. But the senator also said the exclusion "is not perfect. It is regressive. It often leads people to buy more health insurance than they need," he said.   "We should look at ways to modify the current tax exclusion so that it provides the right incentives. And we should look at ways to make it fairer and more equitable for everyone," Sen. Baucus said.

While not mentioning them by name, Sen. Baucus suggested that tax breaks provided through health savings accounts also should be examined to ensure that the benefits are structured fairly and efficiently. Under law, employees can take a tax deduction or reduce their taxable salaries by the amount of their HSA contributions, and accumulated interest on the contributions can be withdrawn tax-free to pay health care-related expenses.

Alarmed at possible moves to curb the tax-favored status of employer-provided health care coverage, the Washington-based National Business Group on Health warned Wednesday that such changes could result in making coverage more costly and possible lead some employers and employees to drop coverage.

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