Health Proposal Could Affect Some in FEHB

A White House proposal to change certain tax code provisions as part of a health insurance reform plan could affect some FEHB enrollees, although the exact effect—even assuming that Congress approves the plan—is unclear. Under the plan, the first $7,500 of income for individuals and $15,000 for couples would be non-taxable, but health insurance premiums—both the enrollee share and the employer share where applicable, as in FEHB—would be taxable. Premiums in some of the higher-cost FEHB plans already are near or above those limits; the limits would be adjusted for general inflation, not the usually higher inflation in the health care sector. Under the plan, employers could adjust compensation packages to provide higher pay and lower health insurance premiums to offset any negative effect of the tax change. However, given the complexities and politics involved in federal pay and benefit policies, the government might find it difficult to make such a change on behalf of its employees.