Members of the House Committee on Ways and Means explored how to best tackle the challenges of tax exclusions on employer-sponsored plans during a hearing Thursday.
GOP members of the panel said the employer exclusion, which was implemented decades ago and has grown to be the largest health tax expenditure, is outdated and needs to be reworked so Americans can choose the plan that works best for their needs.
“Currently, the tax code contains over a dozen health-related tax expenditures – all intended to help more Americans access health care by subsidizing many of the costs,” Chairman [crscore]Kevin Brady[/crscore] of Texas said in his opening statement. “Unfortunately, using the tax code in this way also can have the opposite effect, increasing premiums and costing taxpayers trillions of dollars in the process.”
150 million people in the United States under the age of 65 receive their health care from their employer, and Republican lawmakers argue too many people are confined by their jobs in terms of receiving insurance, which can ultimately result in job lock. Republican members added that Obamacare has limited choices in terms of consumer-driven care with provisions like the Cadillac tax, which threatens Flexible Savings Accounts and Health Savings Accounts.
“A cap on the exclusion would reduce the subsidy afforded to high-income workers, but not eliminate the financial advantage those workers have compared with workers in lower tax brackets,” Joseph Antos, a scholar at the American Enterprise Institute told the panel. “This policy represents a shift toward a more equitable system that could be implemented without disrupting the way most people purchase health insurance.”
Democrats slammed the Republicans’ proposal to limit the employer exclusion, saying it would undermine the Affordable Care Act.
“Republicans have also proposed expanding the use of Health Savings Accounts, which are associated with health plans that have high deductibles and most often used by wealthier households,” said Ranking Member [crscore]Sander Levin[/crscore]. “HSAs are not an adequate replacement for comprehensive health care coverage, as they can actually lead low-and middle-income Americans to put off medical care because they simply cannot afford to pay high deductibles or copays.”
Republican Rep. [crscore]Adrian Smith[/crscore] of Nebraska said he has personal experience with the issue and could have had a better plan bought on the individual market than the one offered.
Rep. [crscore]Tom Reed[/crscore], a Republican from New York, argued by giving employees more control over their plans it would drive down health insurance costs.
“Repealing the ACA as Republicans want to do would have devastating effects for the millions of Americans who use the tax credits that the law offers,” Levin said. “The Advanced Premium Tax Credit and Premium Tax Credit are integral in making health insurance plans in the marketplace affordable for Americans.”
Manhattan Institute Senior Fellow Avik Roy said it’s critical to improve the affordability of health care.
“The best way to expand health insurance choices for workers is to truly equalize the tax treatment of employer-purchased and individually-purchased coverage, through a cap on the employer tax exclusion that is gradually phased in over time,” he suggested. “Congress could design a cap that raised an equivalent amount of revenue as the Cadillac Tax, while considering the additional goal of providing tax relief to every American who purchases health coverage on their own.”
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