Congress Must Protect Employer-Sponsored Health Care

Posted: March 7, 2017  

Congress Must Protect Employer-Sponsored Health Care

By Amy Mutter, President of the local VAHU Chapter and State Legislative Chair

Most Virginia employers and employees are unaware of efforts on Capitol Hill to eliminate or cap the employer tax exclusion under employer-sponsored health insurance plans, affecting an estimated 177 million people across the country – nearly half of all Americans.

On Capitol Hill last month, members of the Virginia Association of Health Underwriters (VAHU) met with members of Congress and staff to stress that the employer-based system is highly efficient at providing Virginia workers and their families with affordable health care options. 

Virginia companies and their employees benefit from group purchasing and its associated economies of scale by spreading risk and avoiding adverse selection. The success of this system is possible because of the preferential tax treatment of employer-sponsored insurance coverage.

As employers and employees are aware, the premiums paid for employment-based health insurance are excluded from federal income and payroll taxes.  It is one tremendous perk of working for a company, helping employers recruit quality individuals and enticing prospective employees to pursue open positions.

On a national scope, the tax exclusion saves workers more than $250 billion a year in federal taxes, and billions more in avoided state taxes. For the average worker, that reduces the cost of their health coverage by at least 30 percent, Forbes has reported.

Proposals that would cap the maximum value of the tax exclusion or eliminate it altogether would be detrimental to the stability of the employer-based market and would negatively affect many Virginians who currently benefit from this important tax break.

“Employer-sponsored coverage is coverage that works, and it’s valued by employees, and so we would hope that members of Congress would keep that in mind,” said Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington.

The debate continues on Capitol Hill, with new proposals being offered for consideration.

For example, Texas Rep. Pete Sessions and Louisiana Sen. Bill Cassidy have proposed to limit the tax exclusion for employer-sponsored health plans to $2,500 annually per individual plus $1,500 annually for dependents.

Opponents say such a proposal – and others that are similar – would be a huge burden on employers, a significant drain in order to maintain employees on company-sponsored plans. As anyone in the health care industry knows,  $2,500 doesn’t buy much coverage.

VAHU understands that changes to the Affordable Care Act are coming.  Like any new legislation, it must continue to evolve so that it can be the most effective, to the greatest number of Americans, as possible.

As employee benefit specialists, collectively serving hundreds of thousands of Virginians, our role is to serve as the advocate for the employer and the employee, providing the most robust health insurance plans at the most reasonable price.

Like many Virginians, we are concerned about proposals to remove the tax benefit from employer-sponsored health care plans, as it will ultimately diminish the number of policy holders in the state.

As experts in health insurance, we hope to serve as a trusted resource for Congress as it moves forward with the proposed revamp of the Affordable Care Act, making sure we cover more people, not less, in the next generation of American health care.