Please note: Although the current ACA replacement draft legislation doesn’t mention the employer exclusion, it is a likely issue to resurface in the coming weeks and months.
NAHU is very concerned about ongoing discussions in Congress that would undermine the employer-sponsored health insurance system by eliminating or placing a cap on the employer-tax exclusion for health insurance. More than 175 million Americans, including those covered by unions, currently receive their coverage through this system, largely due to the tax-exclusion where employers provide contributions for an employee's health insurance which are excluded from that employee's compensation for income and payroll tax purposes.
Last year, NAHU sent nearly 10,000 messages to members of Congress urging them to preserve the employer exclusion. We must continue to inform Congress that eliminating the exclusion would eliminate the incentive for employer-sponsored insurance while capping it would degrade the benefit and serve as one of the largest tax increases in history for middle-class Americans.
The employer-based system is highly efficient at providing American workers and their families with affordable coverage options through group purchasing and its associated economies of scale of purchasing power by spreading risk and avoiding adverse selection. Eliminating the exclusion would eliminate most of the benefits of employer-sponsored insurance, including the means for spreading risk among healthy and unhealthy individuals and group purchasing efficiencies. Capping the exclusion for employees would devalue the benefit and result in a significant tax increase for middle-class Americans forcing many to drop employer sponsored insurance, including dependent coverage. Employers would be incentivized to only offer coverage to their employees that would fall below the value of the cap in order to avoid paying any increased taxes, potentially resulting in a race to the bottom for employers to sponsor insurance that wouldn't meet the cap's thresholds and further shifting costs onto employees. Many of the inherent problems with the Cadillac/excise Tax exist for the employer exclusion such as setting a tax credit sufficiently high enough to cover the significant contribution made by employers today. Also, indexing a credit would need to be set to medical inflation if it is to keep up with the typical rise in health care expenses.
The employer-exclusion tax benefit makes employer-sponsored health insurance a valuable benefit for workers. Although there is not currently any pending legislation affecting the employer exclusion, it is NAHU's strategy to inform Congress as to why it is important to maintain the system that has worked for Americans for decades, and to urge Congress to preserve employer-sponsored health insurance through the continuation of the employer exclusion because it preserves the employer system for health insurance for the vast majority of Americans. Over the coming weeks, as Congress discusses various healthcare reform proposals, we want to be sure that they are informed first and foremost from agents, brokers, and employers about the value of the employer tax exclusion. You can help us spread the message by taking action below:
- Contact your senators and representative. Send an Operation Shout today asking your federal legislators to oppose the elimination or cap of the employer tax exclusion of health insurance in any healthcare reform legislative proposals. You can also call your legislators at the numbers below.
- Tell your employer clients to take action. Your employer clients would be most directly impacted by the elimination or cap of the employer tax exclusion. Tell them to take action sharing why the exclusion must be preserved in any healthcare reform legislative proposals. Tell them to take action here.
- Share your story. As a licensed insurance specialist who works closely with employers to help them offer and utilize employer-sponsored health insurance, you know personally about how the employer tax exclusion directly impacts your clients. Stories from your clients will demonstrate the value of the exclusion and the need to preserve it. We will share your stories with appropriate legislators and staff. You can share your story here.
Take action today and tell your federal legislators to keep the employer exclusion tax benefit!
Don't want to send an email? No problem, you can also reach your legislators by phone:
U.S. Capitol Switchboard can be reached at (202) 224-3121.
U.S. Capitol Switchboard can be reached at (202) 224-3121.
U.S. Capitol Switchboard can be reached at (202) 224-3121.
