GOP Senators Weigh Taxing Employer-Health Plans
Senate Republicans set on reworking the Affordable Care Act are considering taxing employer-sponsored health insurance plans, a move that would meet stiff resistance from companies and potentially raise taxes on millions of people who get coverage on the job.
The move could raise billions in revenue that could be used to help stabilize the fragile individual insurance market. But it could be politically risky, since it could expand the impact of GOP health proposals from Medicaid recipients and those who buy insurance on their own to the roughly 177 million people who get coverage through their employers.
A number of lawmakers are open to the idea, including Sen. Mike Lee (R., Utah), GOP aides said, but there is no consensus yet on whether it should be included in the draft bill being written during this week’s congressional recess.
Under longstanding tax law, compensation in the form of health insurance isn’t treated as income for workers. That means employers can deduct the cost and the value isn’t subject to payroll taxes or individual income taxes. It is a system that economists say distorts the market in favor of generous insurance packages, but like other tax breaks, it has proven popular and difficult to dislodge.
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House Speaker Paul Ryan (R., Wis.), who floated the idea in his own health proposal, has said the tax code unfairly favors people who get their health insurance through work over those who buy it on their own. Republicans, Mr. Ryan said in March, want to “stop the discrimination in the tax code against people who want to go out in a free marketplace and buy the health care of their choosing.”
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Nearly all premiums for employer-provided insurance are excluded from federal income and payroll taxes, an arrangement that cost the federal government more than $250 billion in fiscal 2016, according to the nonpartisan Congressional Budget Office. The portion of premiums paid by employees is often also excluded from taxable income.
The exclusion gives employers an incentive to offer more generous coverage, and economists say that raises total premiums and encourages unnecessary spending. Companies and unions who have fought to retain the exclusion say taxing the plans would prompt employers to scale back benefits, pass the cost of the tax to workers, or stop offering coverage altogether.
Despite the political risk, the idea appeals to some senators because it could bring in a lot of money. That is critical because the health bill must achieve at least $119 billion in budgetary savings over the next decade, under Senate procedures allowing the legislation to pass with a simple majority.
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https://www.wsj.com/articles/gop-senators-weigh-taxing-employer-health-plans-1496350662
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I hope they succeed. No, not to help with the new Trump-Ryan-Turtle care. But I think that such changes will convince many to finally support single payer system. Right now, most, including here on DU. like what they have with employer provided generous insurance; most do not realize how costly it is until they leave their jobs and have to pay expensive COBRA.
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