The world is often a confusing place and nowhere is the confusion likely to be so complete as in the tax system. Here we have the best brains in the Government taking on the best brains in the private sector. The Government wants the maximum tax take. The private sector wants to arrange things so that no one with money ever has to pay any tax. Somewhere in the middle the two world-views collide and, usually, some tax is paid. Anyway, when President Obama signed the healthcare reform bill into law, some of the largest employers in the US let out a collective sigh of pain. As an example, Caterpillar is the world's largest manufacturer of excavators and bulldozers. The day after the President's signature, Caterpillar announced it was taking a charge of $100 million to earnings over an expected loss of tax benefits. A number of other influential corporations have also made allowances in their accounts. The reason is that the healthcare reform ended a tax break given to cover the cost of supplying drugs to early retirees.

Let's take this step by step. If a person continues to work, he or she will be covered under the employer's plan. All other things being equal, working up until you are entitled to Medicare gives continuity of coverage. But there was always a problem if someone took early retirement. Insurance companies were reluctant to insure older people who might more quickly develop serious medical problems. So, to give people aged between 55 and 64 a bridge until they became eligible for Medicare, employers were given a tax break to enable them to pay for their ex-employees' drugs. With the disappearance of the tax break, employers were therefore left with an obligation to pay for drugs without any relief.

Acting through Kathleen Sebelius, Secretary to the Department of Health and Human Services, President Obama has announced a $5 billion package to offset the loss of the tax break. This will run from June 2010 to January 2014 when the individual health plans offered through the new exchanges should come onto the market. It is estimated that about 4,500 private and public employers will be eligible to claim from this new fund. The intention is to provide continuity of coverage under the current health plans and it will be condition that the employers maintain their contributions, i.e. federal money is a top-up not a substitute for payment by employers. Ms Sebelius has also made it clear that the individual health plans offered to early retirees must include coverage for chronic and high-cost diseases and disorders. Employers cannot cherry pick the diseases to be covered. That means the victims of heart attacks or those diagnosed with diabetes and cancer will get continuing support under the plans if federal funding is to be drawn down.

In general, the business community has been slow in showing its gratitude. The feeling seems to be that Government made a mistake when pushing through the reform bill and was now offering a fraction of the total money required to fill in the hole. Nevertheless, the President has recognized the problem and made funds available to help offset it. Whether these funds will prove sufficient is something we will have to wait and see. For the retirees, it should mean access to benefits with fewer hassles.

This article is free for republishing
About Author
For other highly informative insights on numerous topics from Norris Rios visit http://www.hiinetwork.com/employer-health-insurance-plans-get-a-boost.html. Norris Rios is a professional journalist with 15 years of experience delivering news to the public.