Several prominent Republicans have proposed replacing the Affordable Care Act with a “market based” health care solution that replaces the employer tax subsidy for health care coverage with tax credits that would allow families and individuals to purchase health insurance coverage on the individual market. But during a speech at the Heritage Foundation this afternoon, Sen. Orrin Hatch (R-UT) — who is running for re-election — strongly came out against the idea, arguing that such a proposal would “disrupt this whole country.” Hatch warned the deficit super committee against the plan:
HATCH: Insofar as the tax code subsidizes health care, I think it would be a mistak to address any of the tax expenditures for health care as part of a deficit reduction exercise. There might be cause to reevaluate health care tax expenditures in the context of a rate lowering exercise in tax reform, but we should not be undercutting middle class tax benefits to pay for President Obama’s outsized and hopefully temporary welfare state. [...]
And since they have a difficult time straightforward increasing taxes, they’ll be looking for tax expenditures. What are tax expenditures? Well, let me give you the most important one — the most costly one. And that is, corporate provision of tax free health care to its employees. Or at least tax free to the corporation. Now, if you canceled that, you might save upwards of $250 to $300 billion over 10 years, but you’d sure disrupt this whole country.
Eliminating the tax deduction for employer-provided benefits was part of Sen. John McCain (R-AZ) presidential health care plan and was most recently reintroduced by Rep. Paul Ryan (R-WI). But as Hatch suggests, far from creating more “choice” and competition in health care, such an approach would entice young healthy workers to buy cheaper but less substantive insurance in the individual insurance plan market place and increase costs for sicker workers, pricing many out of coverage altogether.