Senate Republicans Consider Taxing Employer-Sponsored Plans

While they rework the AHCA into a more palatable bill, Republican Senators are reportedly mulling taxing employer-sponsored health insurance plans, according to The Wall Street Journal. 

According to the report, employer-sponsored health plan premiums are exempt from federal income and payroll taxes—costing the federal government an estimated $250 billion in 2016. Employees can also deduct the portion that they pay for premiums from the annual taxes, making employer-sponsored plans nearly taxless. According to the report, this incentive gives employers the opportunity to offer better coverage options.

However, this strategy is widely opposed by large employers and even some House Republicans. The plan could potentially shift the cost burden from the federal government to the largest sector of health insurance buyers in the country. 

“Most of America gets their insurance through the workplace,” Representative Warren Davidson (R-Ohio) told The Wall Street Journal. “[The AHCA] was an overhaul of the only part [of the health system] that isn’t broken inherently.”

The ACA included a 40% excise tax on high-cost, generous employer health benefit plans, known as the “Cadillac Tax.” However, last year Congress delayed the implementation of this tax until 2020. Economists have argued that employers who offer overly generous plans as a result of tax incentives, lead to higher overall premiums and unnecessary health care spending. 

Because the current tax exemption is popular, due to it is wide impact on an estimated 177 million enrollees who are covered under employer-based plans, the proposal may not gain traction in a political climate where health reform is already highly unpopular among voters. 

Senate Republicans stated last month that the drafting process for the current health care bill could take weeks to months—a final bill is expected sometime this summer. —David Costill