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A Project of The Annenberg Public Policy Center

Half the Story on Health Care

Democratic Sen. Ron Wyden of Oregon has introduced his "Healthy Americans Act" before, aiming to bring about universal health coverage. This year he’s trying again, facing not only legislative hurdles in gaining support for the plan but a critical — and misleading — ad campaign by a coalition of labor unions.

The American Federation of State, County and Municipal Employees, the United Food and Commercial Workers and the National Education Association are airing a radio ad in Wyden’s state, warning the public that his plan would tax their employer-sponsored health care benefits. But the ad leaves out the part of Wyden’s proposal that would give standard tax deductions to everyone earning less than $125,000 a year ($250,000 for couples).

The ad says: "The last thing we need is to pay more. But Senator Ron Wyden would tax the health care benefits we get at work — as if they were income. Taxing health benefits? That doesn’t make sense."

Listen to the full radio ad targeting Wyden.

Wyden’s proposal, introduced as S. 391 on Feb. 5 and referred to the Senate Finance Committee, would tax the value of health benefits. Specifically, it would require employers to "cash out" their health plans, raising workers’ wages instead of paying toward their health insurance. Workers would obviously have to pay income taxes on the additional wages. As long as they earned less than the income caps mentioned above, however, they would get a federal tax deduction. Individuals making less than $62,500 would get a $6,025 deduction, which would phase out for higher income groups. An analysis by the Lewin Group, published in September 2008, said that all families that are currently insured (the target of the labor ad) and have income of less than $150,000 a year would see net savings under Wyden’s plan. (The Lewin Group is part of a subsidiary of UnitedHealth Group, which also owns major health insurer UnitedHealthcare, but says it operates with "editorial independence.")

It’s true that Wyden’s plan would change the U.S. system of mainly employer-provided insurance. Individuals would choose from a list of approved private insurance plans, which could include the same employer-provided plan workers have now — but only if the employer continued to offer it, and if it met certain requirements.

Correction, May 22: We originally misidentifed AFSCME as the American Federal, State, County and Municipal Employees.