Dear Editor:

Cody Sossamon’s column on June 16 took aim at the new health reform law, particularly its tax treatment of employerprovided health insurance. Cody states that under the new law, any contribution toward your health insurance premium from your employer will be taxed as regular income starting in 2011. This is not correct.

The Patient Protection and Affordable Care Act does require that employees disclose the value of the health coverage they provide to employees on the employee’s annual W-2, starting in 2011. But this disclosure does not make the health benefit taxable. Its purpose is to make employees aware of the full cost of the health benefits they receive. Health policy experts say that making the cost of health care more visible is one small step toward making the cost more manageable.

The new law does impose an excise tax on high-cost employer sponsored insurance plans. But this excise tax does not take effect until 2018 and it applies only to plans that cost more than $10,200 for single coverage and $27,500 for family coverage — twice the average cost of health care coverage. The new law provides even higher thresholds for retired individuals and for plans that cover employees engaged in high-risk professions. The new law also allows adjustments for firms whose health care costs are higher due to the age and gender of their workers. Tax policy experts claim that the excise tax acts as an incentive for plans to manage costs better and keep premiums below the threshold — thus avoiding the tax.

Cody Sossamon also reports that the new law requires that purchases over $600 from a particular vendor be reported. This is correct. The IRS estimates that as much as $300 billion in tax revenues are not collected because of income that is not reported. To offset the cost of the new health care law, there is a provision that requires Form 1099s to create paper trails for business purchases greater than $600 per vendor. The purpose is to increase tax compliance without raising taxes on small businesses. The new law contains $37 billion in tax credits to help small businesses buy health insurance, and this compliance measure is one way of offsetting the revenues lost.

The IRS has published this report as a compliance reform for years, and in the search for revenues to offset the cost of healthcare reform, it was finally taken off the shelf and passed as part of this far bigger bill. The reporting requirement has not passed previously because it will probably prove burdensome, and I would not be surprised to see this provision amended by a higher threshold above $600, if not repealed altogether.

John Spratt U.S. Fifth District Congressman

Washington, D.C.

& Rock Hill, S.C.