Commentary: Taxing health insurance

Texas faces a dual challenge when it comes to delivering health care. The Lone Star State leads the nation in the number of uninsured Americans. We also rank fifth highest for healthcare costs.

A new federal policy proposal threatens to make both statistics worse by burdening families and employers by charging more for poorer health insurance coverage.

Currently, workers receive their employer-provided health benefits tax-free — the benefits are "excluded" from income. Some members of Congress want to limit tax-free benefits and slap a federal tax on employer-sponsored insurance premiums above government-defined thresholds. But, as healthcare costs and inflation continue to rise, these tax limits quickly fall behind increasing premiums. As a result, what was once considered a high-cost plan now includes typical employer-provided health benefits, impacting working-class families and small businesses alike.

Levying a tax on the insurance premiums of hard-working Texans could lead to families earning $100,000 per year facing an additional $3,500 in healthcare taxes. Families earning less than $42,000 would be saddled with $1,250 in additional taxes and both would likely see additional costs in the form of higher deductibles and copayments. These increases pose unsustainable hardships as most Texans already report feeling increased stress due to inflation.

Employer-sponsored health care is crucial for Americans, and much of it comes from small businesses. In Texas, 68% of small employers offer medical benefits, with 64% of employees taking advantage of them — numbers that exceed the national average. With 365,200 small employers across the state employing more than 1,490,000 people, these businesses cover a significant portion of healthcare expenses, supporting 76% of costs for individual employees and 59% for families.

This proposed tax would severely strain small businesses already seeing higher operational costs. Increasing healthcare expenses leads to reduced employee benefits, hinders job creation, and contributes to poor health outcomes among working-class families.

While the fiscal burdens cannot be overlooked, the most important measure for Texans and their families is their health and well-being. Among adults under 65, 85% of uninsured individuals. often skip or delay necessary treatments due to cost concerns. A strong employer-provided healthcare system plays a critical role in promoting public health.

Despite obstacles, Texas has been trending in the right direction, increasing the number of residents with private healthcare coverage. Between 2021 and 2022, more than 700,000 previously uninsured Texans obtained private health insurance, driven largely by increased affordability and accessibility. We know that when affordable options are available, Texans are eager to secure healthcare coverage for themselves and their families.

Admittedly, Texas faces significant challenges in delivering affordable and comprehensive health care to its residents. However, shortsighted proposals from Washington to tax employer-sponsored health care won't solve these issues; they'll only worsen problems and push medical coverage out of reach for our working class. This would widen the healthcare gap, burdening families financially and stifling economic growth for employers.

As Texas confronts high uninsured rates and soaring healthcare costs, the looming federal policy proposal to tax health care threatens to increase costs for less effective coverage. Policymakers must prioritize sustainable solutions that ensure Texans can access health care without financial strain. This means focusing on affordable healthcare access and supporting small businesses to provide vital medical benefits to their employees without repercussions. Congress should not raise federal revenue by taxing health care.

Texans urgently need federal lawmakers to protect our health care and safeguard the crucial role of small businesses in providing essential medical benefits. By rejecting this tax scheme and keeping medical costs manageable, we can achieve better health outcomes and ensure access to vital medical services.

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Cathie Adams of Rockport is the first vice president of the Eagle Forum.

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