Republicans Shy Away From Their Own Health Plan - Troubled Rollout of New Law Has GOP Rethinking Taxing Employer-Based Insurance Coverage

From The Wall Street Journal:

Democrats' politically bruising experience over the Obama health law has prompted leading Republican policy experts to rethink one of the party's own long-standing ideas about remaking the health-care system.

President Barack Obama and his party have suffered in public-opinion polls amid the health site's troubled rollout and as some five million people lost existing coverage that didn't meet new standards, even as the law seeks to expand coverage to many more Americans. Some Republicans are now worried that a GOP proposal to begin taxing health-care benefits offered through employers—which would affect some 160 million Americans—would cause market disruptions far more severe and expose the party to its own political peril.

The proposed tax change was proposed by President George W. Bush in 2007 and by Sen. John McCain as presidential nominee in 2008. A similar GOP plan in the House has 117 co-sponsors.

Now, some Republican policy specialists have started to advocate that the GOP instead adopt a more modest approach.

"There's an acknowledgment that massive overturning of the employer-sponsored system is something people just aren't ready for," said Douglas Holtz-Eakin, a leading Republican economist and chief policy adviser to Mr. McCain's campaign.

"Republicans will walk into the same buzz saw if they aren't savvier and more thoughtful," said Dean Clancy, vice president for public policy at FreedomWorks, a tea party-aligned activist group that backs conservative candidates. He said his group typically favors bold strokes, but that "in health care, incrementalism is the way forward."

Republicans have promised to "repeal and replace" the Affordable Care Act, but the GOP House has staged votes only on repeal, in part to avoid the sort of scrutiny that inevitably comes with specific proposals. Some Republicans say that needs to change.

"You can't beat something with nothing," said Rep. Tom Price (R., Ga.), who has proposed legislation to modify—but not fully rewrite—the tax treatment of health insurance. "More and more members [of Congress] are discussing the imperative for us to have a positive alternative."

Mr. Obama would surely veto any effort to repeal the health law or replace it with a GOP approach, but the new thinking could represent a change to the party's core message on the issue going forward.

For decades, employers have been allowed to buy their workers health insurance without either the company or the employees owing taxes on the value of the coverage. Republicans have long proposed replacing that break with a new tax credit for all Americans with insurance—part of a broader plan to sever the link between employment and health care that the party believes would induce consumers to demand lower and more transparent prices, thus trimming health costs.

The change also would remove incentives in the tax code for employers to offer their workers very expensive health plans.

Employers would still be able to offer health coverage. But if enough younger, healthier workers sought coverage on their own, it could leave older, sicker people in the workplace pools, making them too expensive to operate.

Leading Republican health-policy experts say there are ways to mitigate the risks but warn it would be a political mistake to push a plan like that now.

"I've come to the conclusion that it would be much better to try and thread the needle and not disrupt the vast number—millions and millions of Americans—who are in more or less stable employer insurance today," said James Capretta, a senior fellow at the Ethics and Public Policy Center, a conservative think tank.

He and others recommend capping the tax break available for health insurance through work and finding other ways to pay for additional tax breaks to those who buy insurance on their own.

Mr. Price's plan is an example of this more modest approach. The congressman said in an interview that interest in this idea has grown among his colleagues in the aftermath of the health-law rollout.

Neera Tanden, president of the Democratic-leaning Center for American Progress and an expert on health care, said even the modified Republican plans would encourage some employers to drop coverage, meaning many workers would have to find new arrangements.

"It is a great irony that there's been such stark criticism of the president for a small percentage of people facing lost coverage," she said, "when the traditional plans of the Republican Party on health care dwarfed anything that's happening from the Affordable Care Act."