Davis said that the average retiree would save $434 a year through premium conversion and that “a modest amount of money to those on a fixed income adds up and has a real impact. It is critical for annuitants to receive relief since they also shoulder the burden of increasingly high health insurance and prescription drug costs.”
While the saving to the retiree may be described as modest, it does add up from the government’s budgetary point of view. The Congressional Budget Office-whose opinions carry great weight in congressional deliberations over bills with spending or tax impacts-has estimated that there would be an effective cost in lost tax revenues of $12 billion over 10 years. While that estimate was done in the context of a prior Davis bill in the last Congress, that figure is not expected to change significantly.
In addition, there is concern about the unknown-and potentially much higher-cost in lost tax revenues from extending such a tax break to private sector retirees, of whom there are many more. While the Davis bill would not directly affect the private sector, it would set a strong precedent for extending the same tax break to those retirees.
Companion legislation is pending in the Senate. A statement from the counterpart Homeland Security and Governmental Affairs committee said that panel “will explore options to provide that the same or similar health insurance premium conversion arrangements afforded to federal employees are made available to retirees.”