Congress may tax top executives' medical plans

As the chief executive of TRW Automotive Holdings Corp., John Plant received the company's generous health-care benefits in 2008, as well as special "executive medical" coverage worth an additional $38,272.
When he eventually leaves the Michigan parts maker, Plant and his wife will be entitled to health care for life. TRW values that coverage at $1.4 million. That's enough, according to public filings, to provide him the same level of care he would have received under the National Health System in his native England.

In contrast to his $1.7 million salary, Plant, 55, doesn't pay taxes on these perks. Under U.S. law, employer-paid health insurance premiums — even lavish ones — are exempt.

That could soon change as lawmakers look to target "Cadillac" or "gold-plated" coverage like Plant's to help pay for health-care reform.

Proposed legislation circulated over the weekend by Sen. Max Baucus, D-Mont., chairman of the Finance Committee, would pay for the sweeping reform in large part by taxing insurance companies on the most expensive policies they offer.

Although no exact policy price threshold has been established, supporters estimate such a tax could raise as much as $180 billion over 10 years. Originally championed by Sen. John Kerry, D-Mass., who introduced the idea over the summer, the tax also would help curb health-care costs, those supporters say, because employers would have a financial incentive to seek cheaper, less generous plans, while insurers would be under pressure to reduce costs and premiums on their priciest products to avoid the levy.

Officials across the political spectrum say such a tax would iron out a wrinkle in the tax code long criticized as regressive and unfair to lower-wage workers and uninsured people.

"We're interested in it as a discipline within health care," Sen. Charles Grassley, R-Iowa, said shortly after the proposal emerged in August.

Opposition mounts

The top brass at many large companies enjoy blue-chip medical coverage. Unlike their rank-and-file employees, these executives often don't pay a dime for co-payments, out-of-network specialists or deluxe annual checkups that can cost more than $10,000.

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