The Consequences of Taxing Healthcare Benefits

Managed Care Weekly Digest

By a News Reporter-Staff News Editor at Managed Care Weekly Digest -- - As efforts to repeal and replace the Affordable Care Act (ACA) move through Congress, a new survey of Lockton employer clients shows overwhelming opposition to taxing employer-provided healthcare benefits (see also Lockton).

In fact, more than 92 percent of those responding to the survey are against any policy that would tax workers, their families and employers on a portion of health plan premiums.

Policy makers have been considering imposing additional income and payroll taxes on employees and payroll taxes on employers. These taxes would apply to at least a portion of health insurance premiums. Recent drafts of the ACA repeal and replace legislation now moving through Congress included such a tax. The current version of the bill does not, but there are concerns Congress might resurrect the tax in pursuit of additional revenue.

More than 177 million Americans receive health insurance through an employer, and employers pay more than $668 billion annually to insure their employees. Under current tax law, those benefits are provided without employers or employees paying any income or payroll taxes on them.

Some lawmakers and think tanks argue that taxing group health plans will drive down overall health costs because it will decrease consumer demand for healthcare. They also argue that employers - if they reduce benefits to avoid the tax - will increase wages to make up for the reduction in health benefits.