House GOP members are considering taxing employer-sponsored health plans to steady the public healthcare market, Employee Benefit Adviser (EBA) reports. The move could affect as many as 177 million workers who get their health coverage through work.
EBA says that there are no income or payroll taxes on health benefits. However, employer-sponsored plans have tax-favored status, which cost the federal government more than $250 billion in fiscal year 2016, according to Congressional Budget Office records. This cost makes some GOP members amenable to the tax.
House Republicans tried to tax employer-sponsored plans in the early days of the Trump administration when drafting their proposal to repeal the Affordable Care Act (ACA) and replace it with the American Health Care Act (AHCA). But the the tax met so much opposition that Republicans shelved the idea.
The Republicans’ tax idea is likely to meet more opposition. Businesses don’t want it, and Democrats assail the idea as removing a tax on the wealthy under the ACA and indirectly placing it on the insured.
But the underlying issue here is that the GOP still has to find a solution to perhaps the biggest problem facing its the AHCA: Funding it. The House narrowly passed its bill in early May. GOP lawmakers were (prematurely) victorious in eliminating the ACA mandate, slashing taxes and relaxing limits on contributions to health savings accounts to make high-deductible plans more affordable.
But funding the AHCA remains problematic. That's part of the reason why the unpopular Cadillac tax remains in the in the proposal. Others argue it doesn’t address rising costs for specialty pharmaceuticals, for example, or the consequences of removing Medicaid subsidies from the federal government to the states.
In the meantime, the ACA remains the law and therefore employers must comply with its measures until GOP lawmakers revise their own health plan and find viable ways to fund it.