After years of opposing the Affordable Care Act and vowing to replace it, Republicans still lack a serious healthcare plan.
“I demanded to know from Speaker Johnson what the Republican plan for healthcare is to build the off-ramp off Obamacare and the ACA tax credits to make health insurance affordable for Americans,” Greene said last month. “Johnson said he’s got ideas and pages of policy ideas and committees of jurisdiction are working on it, but he refused to give one policy proposal to our GOP conference on our own conference call.”
That’s unfortunate, because the GOP could use right-of-center principles to ensure millions of Americans receive health insurance, particularly independent contractors and small-business employees. Most Americans already receive some kind of government subsidy for their health coverage. Seniors have Medicare. Veterans use the VA. Low-income Americans get Medicaid or an Affordable Care Act premium tax credit. And most working-age adults with employer coverage enjoy one of the largest tax breaks in the federal code.
Employer-sponsored health insurance is a tax-free benefit. Neither the employer nor the employee pays payroll tax on it, and the employee owes no income tax on the benefit. The average plan is worth about $17,000, meaning the federal government effectively provides a $300 billion annual tax break. If 180 million Americans get coverage through employer plans and each plan covers an average of two people, that’s a subsidy of more than $3000 per plan per year. States and cities with income taxes—from New York to St. Louis—lose additional revenue on top of that.
Independent contractors and small-business employees are the exception. Companies with fewer than 50 workers aren’t required to offer health insurance, and many firms classify workers as independent contractors to save money. Independent contractors must buy coverage with post-tax income. They pay both sides of the payroll tax—a horribly regressive tax—plus federal, state, and local income taxes. The same goes for many small-business employees, minus the employer’s share of payroll taxes.
As a result, roughly one-fifth to one-quarter of independent contractors have no health insurance. They earn too much for Medicaid or ACA subsidies, yet nearly everyone else in the country—except small-business workers—benefits from a government-subsidized plan.
One of the easiest fixes to America’s healthcare system would be to give independent contractors and small-business employees the same preferential tax treatment that corporate workers receive. Offer them a $3000 refundable tax credit per plan to purchase health insurance. Even a non-refundable credit would be an upgrade, though it’d cost less and cover fewer people. Such a credit would bring more young and healthy people into the insurance pool, helping stabilize costs for everyone. For many Americans under 30, it’d likely cover most, or even all, of a year’s premium for a decent plan.
Roughly 46 million Americans get coverage through direct-purchase private plans, about 20 million with ACA subsidies. That leaves around 26 million people who are on non-subsidized insurance plans. Even if the number of plans is closer to 20 million, a $3000 per plan credit would cost roughly $60 billion annually. If it brought five million new plans into the market, that’s another $15 billion.
The country could easily afford that by cutting waste in existing healthcare programs and closing inefficient tax loopholes. Fraud and waste in Medicare and Medicaid exceed $100 billion a year. Medicare Part D’s failure to prioritize low-cost generics wastes billions more. We live in a country that offers tax breaks for racehorses and private-jet depreciation. Regardless of how one feels about those provisions, surely Washington can provide comparable relief to working- and middle-class Americans trying to buy their own health insurance.