Employee health plan groups see pros, cons in tax reform proposals

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The absence of language to repeal provisions of the Affordable Care Act in both House and Senate tax reform bills spells both good and bad news for employers.

Lobbyists and associations representing healthcare insurance and employee benefit groups have mostly opposed efforts to eliminate the mandate that all Americans carry health insurance, or pay a penalty, for fear it would cause instability in the marketplace and shift costs to employers and other stable health insurance customers.

But they have been pushing hard for the elimination of taxes on health insurance, including the so-called Cadillac tax, a 40% surcharge scheduled to take effect in 2020 on the most expensive employer-sponsored health insurance plans, and the current across the board 3% tax on policies.

In a July letter to Senate Finance Committee Orrin Hatch (R-Utah), Marilyn B. Tavenner, president and CEO of the trade association America’s Health Insurance Plans, said the Cadillac tax would impact most businesses within a few years of taking effect, with a disproportionate impact on those that employ older workers.

“Not only is the Cadillac tax a barrier to long-term planning for both large and small businesses alike, it does not give businesses the freedom and flexibility to design health benefits that best meet their individual needs,” she wrote.

The 3% Health Insurance Tax that is already in effect, she said, has raised the cost of health insurance premiums by more than $100 billion.

“Together, the HIT and the excise tax increase costs for businesses and limit their ability to create jobs. Repealing these taxes would be an important step toward reducing health insurance premiums, promoting affordability, and helping more employers offer quality health benefits,” Tavenner wrote.

AHIS and other groups continue to push for a repeal of the taxes. After the House last week released its tax proposal without any ACA provisions, Katy Spangler, senior vice president of health policy for the American Benefits Council, said another possible vehicle for winning that tax relief could be an end-of-year government funding package, like the bill that was used in 2015 to extend the original implementation date of the Cadillac from 2018 to 2020.

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