Is employer health insurance at risk? A veteran benefits lobbyist weighs in

• Key Insight: Discover how employers' purchasing power shapes healthcare affordability and policy leverage.
• What's at Stake: Policy changes could dramatically increase public spending and disrupt employer health offerings.
• Expert Quote: "Employer tax exclusion leverages roughly $6 of employer spending per revenue dollar." — Jim Klein.
• Source: Bullets generated by AI with editorial review

Critics of the U.S. healthcare system often argue that working Americans receiving health insurance through work was an unintended consequence of World War II price controls. But there are others who counter that the purchasing power of employers is unmatched and invaluable for helping make healthcare more accessible and affordable.

One such individual is Jim Klein, who was the nation's top employee benefits lobbyist for three and a half decades and a vigorous defender of employer-provided group health insurance's tax-favored status. He stepped down at the end of 2024 as president of the American Benefits Council, an employee benefits trade association based in Washington, D.C. representing more than 230 of the world's largest corporations for which he has served since 1988. 

Klein — who previously practiced law, worked as a legislative assistant for a member of Congress and managed pension and health care policy for the U.S. Chamber of Commerce — now serves as a senior adviser to the American Benefits Council. 

Read more: How Congress can address healthcare affordability for small businesses

In this role, his focus is on the international benefits arena, since nearly all council members have a global footprint, as well as anticipating special projects that address states and localities becoming much more involved in the employee benefits space. Recently, he was co-recipient of the Employee Benefit Research Institute's 2025 Lifetime Achievement Award. The following interview was edited for clarity and space.

In helping educate U.S. lawmakers, congressional aides, policymakers and regulators learn about the importance of preserving employer-provided benefit plans over 37 years, what were your biggest challenges and accomplishments?
KLEIN: The two principal challenges were that employee benefits law and policy can be very technical and complex, and that very young staff members stay on Capitol Hill for a few years and then move on. So you're in a constant-education mode with people, particularly when those who are on the relevant committees have jurisdiction over the Employee Retirement Income Security Act (ERISA). I think they work hard and are very dedicated. But sometimes you run into people who just really have a very skeptical view of employers and their motives.

In terms of accomplishments, I got very lucky in hiring fantastic colleagues who are substantive experts with very good political acumen. Another is just continuing to be trusted on both sides of the political aisle, and that's what we're most proud of — that Senate and House Republicans and Democrats reach out to us for our substantive expertise. We always have tried to be more pragmatic and not ideological. Not that we don't have a point of view; we do. But we're pretty committed to being problem solvers. With the Affordable Care Act, we wanted to see the healthcare system reformed. We didn't direct our members to oppose the legislation as many other business groups did, but rather continue working to make it better. To some extent we succeeded.

What is the biggest misconception on Capitol Hill about how the U.S. healthcare system works and what policy tweaks must be put in place to end perverse and harmful practices?
KLEIN: It's that the employer's objective is to save money and they don't necessarily always have the best interests of their employees and family members at heart. That is just not the case. They spend so much time and effort trying to design plans to help their workers and their family members get and stay healthy, and not have to worry about the financial aspect of getting healthcare services. I think there are policymakers who believe somehow these companies can snap their fingers and quickly put something into place, not realizing the long runway our members who are huge Fortune 500 companies for basically making plan design changes and then implementing them.

Read more: ICHRAs offer a new approach to health benefits for employers

What sort of guardrails need to be in place to protect employer-provided health benefits from fraud, waste and abuse?
Healthcare is maybe the one product or service that Americans regularly pay as much or more for poor quality as we do for good quality, and I don't think that we would tolerate that on anything else that we purchase. You wouldn't do it for a television or restaurant, but somehow it has become accepted that the quality outcomes are good or bad. Sometimes when they're not good, you have to go back for a second time and there are further complications. So it ends up actually being more expensive for poor quality than for good quality. So it's turned upside down. I think the answer is better aligning quality and cost. There does seem to be bipartisanship around the need for greater transparency from hospitals and pharmacy benefit managers. Its opaqueness needs to be addressed in order for purchasers to be able to purchase wisely. Another area that needs to be addressed is site-neutral payment reform. You go to the doctor for a procedure that costs $300 and come back a few months later to the same doctor, same procedure, same examining room, and it's $500. Why? Because in the meantime that physician practice was purchased by a hospital, and now it's a hospital outpatient department. That's certainly an area of waste that we're trying to crack down on.

Any chance that individual coverage health reimbursement arrangements known as ICHRAs will gain traction in Trump's second term and possibly supplant group health plans down the line?
KLEIN: The administration has some fondness for account-based plans. But I think that for more employers to adopt it, they'll have to see a more robust, stable individual marketplace. Employers believe in the importance of a strong individual marketplace, even though they don't directly play in it. So I think there's going to be more interest in it from the incoming administration than the previous one. I don't know that they will replace group plans, but some Republicans in the past like former speaker of the House Paul Ryan often talked about the "backpack" concept of giving individuals money and letting them go out into the marketplace. It's gonna be very hard for individuals to replicate the same success as employers are able to do on behalf of individuals. Recent data from the Employee Benefit Research Institute shows that in the individual marketplace, the government subsidy is on average about $6,000 a person and in the group marketplace it's about $2,400 on average. There's a disparity there that's hard to overcome. Now, would we like to see a stronger sort of ICHRA account-based system side by side with the employer system? Absolutely.

To what extent are you concerned about the possibility of employer-provided benefit plans losing their tax-favored status, as well as the threat of occasional ERISA pre-emption battles?
KLEIN: Those are our top two issues. We're certainly going to see this tax issue in the very near future given the expiration of many provisions of the 2017 tax law. The tax expenditure for employer-sponsored health coverage is by far the largest expenditure in the entire federal budget — bigger than the tax expenditure for retirement, which is the second largest one, bigger than mortgage interest deduction, charitable contributions. It's something on the order of $3.1 trillion over the next 10 years. We've got the House Republican Study Committee, which is composed of the majority of the Republican members of the House, including every member of the leadership, and they call for capping the exclusion. The right-leaning Paragon Institute think tank and also Project 2025 are calling for a cap on the employer deduction at $12,000 per person per year. These are real threats, and I think that one of the arguments we're making here is that for the revenue loss to the federal government associated with the tax-free benefits that employees received was something on the order of $216 billion but in that year, employers spent $1.3 trillion on healthcare coverage for employees and family members. So essentially for every dollar of tax revenue lost, employers were spending on average $6.02 on health care coverage. So this is a huge bargain for the American taxpayer, and it would cost us multiple times more to provide the same level of financial protection for health needs if it had to be done directly through government programs, or on the other side, through subsidies in the individual marketplace. It is by far the most cost-effective approach for our nation. That is what needs to be looked at, not this big looming number of what the tax expenditure is; it's what it would be all in the alternative that's relevant.

Read more: Inside ERISA's impact on employee health plans

In terms of ERISA, federal preemption was called by the authors of ERISA the law's crowning achievement. It would not have become law without federal preemption because business and labor would not have gotten behind it, and we see the states steadily eroding away. So standing up for federal preemption is critical. We often have a challenge explaining federal preemption to both Democrats and Republicans for very different reasons. From the Republican side of it, they tend philosophically to favor more state and local control. From the Democratic side of it, they're frustrated that the federal government isn't doing more. So they're more comfortable letting the states go ahead and do it — notwithstanding the challenges caused to multistate employers. Interestingly since the pandemic, more small and midsize companies are finding themselves to be multistate employers.