Another problem, he says, would be deciding how to administer the credits and, in particular, how to make sure the credits subsidize only the insurance of needy workers. If the government simply provides a subsidy to small businesses, it ends up subsidizing the insurance of highly paid workers such as doctors, lawyers and computer engineers who work for small firms. No such problems arise if tax credits go to individuals, Butler says. Employers are not necessarily the best sponsors of coverage. Butler compares his proposal to the withholding system for income and payroll taxes.
Employers withhold taxes from employees' paychecks and send the money to the government.
They serve merely as a clearinghouse for tax payments. Employers could do likewise with health insurance by using tax credits to pay the premiums on plans selected by their employees. With individual credits, eligible employees could join any plan available in their area, not just the one sponsored by their employer. And with the credit not restricted to employer-sponsored coverage, eligible workers could enjoy a wide variety of plans. This reform could open the door to coverage offered through churches, unions, professional and trade organizations, large corporations and even the highly regarded Federal Employees Health Benefits Plan used by members of Congress, their staffs and other federal workers.