Financing Health Coverage In The Private Market

The Health Security plan caps employer contributions for insurance premiums as a percent of payroll. The cost of providing health coverage declines for most firms that currently provide insurance.

Employer Payments

Consumer Payments

Working Individuals and Families: Individuals and families in which at least one person works pay a maximum of 20 percent of the premium to enroll in the average-cost health plan in their area.

Working individuals and families may have their share of the premium deducted from their paychecks or write a check to the local health alliance.

Consumers pay premiums based on the type of policy they need to purchase:

Individuals and families with incomes below 150 percent of the federal poverty level -- $21,525 for a family of four -- are eligible for discounts on the employee's share of the premium.

Part-Time Workers: Part-time workers are responsible for the 20 percent employee share of the premium, and workers with incomes below 150 percent of the poverty level receive discounts.

The number of hours an employee works determines how much of the employer share of the premium is paid by the employer and how much by the worker. For example, an employer would pay 40 percent of the premium for someone who works half-time. The worker is responsible for the remaining 40 percent of the premium, with discounts provided on a sliding-scale basis.

A part-time worker with more than one job receives contributions from more than one employer toward the employer's share of the premium.

Unemployed Individuals: Unemployed individuals and families are responsible for the 20 percent employee share of the premium and receive a discount if their incomes are below 150 percent of the poverty level. They also are responsible for what would be the employer's share of the premium but receive discounts on a sliding-scale basis to help cover the cost.

Self-employed Individuals: The self-employed worker pays the 20 percent employee share of the premium and receives a discount if his or her income is below 150 percent of the poverty level. Self-employed workers also are responsible for the 80 percent employer share and receive the same discounts as small employers. They may deduct from their taxes 100 percent of their health care premiums.

Tax Deductibility

Employer contributions toward the premium and toward cost sharing related to the nationally guaranteed comprehensive benefit -- as well as for additional benefits phased in by the year 2001 -- are fully tax deductible and not counted as taxable income for employees.

Tax preferences continue for benefits in excess of the nationally guaranteed benefit package offered as of January 1, 1993, for ten years after enactment of health reform.