McCain's Proposed Health Plan and effect on Employer Sponsored Coverage

Adapted From AP Article

The unkown about Sen. John McCain's health plan is how many employers will react, and more speifically, how many would drop health insurance coverage for their workers because of the tax policy changes?

The Republican presidential candidate has proposed that all Americans buying health insurance get a refundable tax credit, $2,500 for individuals and $5,000 for families. At the same time, he would treat employer contributions toward health insurance like income, meaning workers would have to pay income, but not payroll, taxes on it.

Most health analysts say McCain's approach would strengthen the individual health insurance and small-group insurance market. And by strengthening that market, it will pull in workers now covered through their jobs.

Employers began offering health insurance as a benefit during World War II, when a labor shortage increased competition for workers. Wage controls limited employers' ability to offer higher salaries, so they offered benefits like health insurance. Health benefits were not a major expense initially, but they have become a significant part of payroll as health care costs have spiraled upward.

A poll of employer-insured voters conducted by the Kaiser Family Foundation found that nearly two-thirds thought it would be harder to find a health insurance plan that matches their needs and handle administrative issues if they were buying health insurance on their own. Eight in 10 said they thought it would be harder to get a good price for health insurance or get coverage if they were sick.