Friday, October 23, 2009

The danger of taxes on health care benefits

First consider someone without coverage.

A man who does NOT have health insurance is hit by a car while crossing the street. One month later he is released from the hospital with a $400,000 bill. The man cannot afford to pay the bill, and is forced to declare bankruptcy. He suffers a serious credit hit, but begins working again to try to get his life back on track.

Next consider someone with coverage.

A man who DOES have health insurance is hit by a car while crossing the street. His insurance company pays his $400,000 bill. One month later he is released from the hospital. Under the Baucus Health Care bill (and many other bills proposed by Democrats), he would be taxed for the $400,000 worth of health care benefits he received from his insurance. (the limit on this kind of taxation is unspecified) The man cannot pay his tax bill because he doesn't make anywhere near $400,000 a year. The man files for bankruptcy. The man better hope the Democrats tax his health care benefits as income, because if they don't? Bankruptcy will NOT eliminate them.

While we're delving into the bankruptcy and tax implications of these health care bills, lets talk about the fine for not having insurance. If you, for whatever reason, are unaware that you are required by law to get insurance under these bills, and get a letter a year or two into the plan saying you owe one or two years of fees to the government for not having health care coverage, you will probably not be able to bankrupt out of these fines. Because you can't bankrupt out of penalties owed to the government.



Eowyn said...

Quick comment; I think you have the headers (man with/without coverage) reversed on the two paragraphs.

Fletch said...

Fixed. Thanks for the heads up.