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June 2, 2017

GOP senators considering tax on employer-sponsored health plans

Daily Briefing

    Senate Republicans working this week to draft a plan to repeal and replace the Affordable Care Act (ACA) are considering taxing employer-sponsored health plans, according to GOP aides.

    How to succeed in the next era of health reform

    Employer-sponsored insurance

    Under current law, most premiums for employer-sponsored health insurance are not subject to federal payroll or individual income taxes, meaning employers can deduct the cost of providing the coverage. Some economists say the system encourages employers to offer generous and more costly insurance benefits that increase total premiums and result in unnecessary spending. According to the Congressional Budget Office, the exemption cost the federal government more than $250 billion in fiscal year 2016—funding that the Journal reports could prove useful as senators work to craft a bill that meets the Senate's strict rules for the budget reconciliation process, which lawmakers are eyeing to use to pass legislation to repeal and replace the ACA.

    Some senators open to taxing employer-sponsored health plans

    GOP aides said several Republican lawmakers, including Sen. Mike Lee (R-Utah), are open to some sort of employer-sponsored health plan tax, but there has been no final decision on whether it should be included in the Senate's draft bill to repeal and replace the ACA and how revenue from the tax would be used. And according to Vox’s Dylan Scott, at least one GOP senate aide said taxes on employer-sponsored health plans were not on the negotiating table.

    Moreover, similar efforts have failed to gain traction in the past as employers and unions have strongly opposed the taxes, which they said would prompt employers to reduce benefits packages, shift more costs onto workers, or stop offering coverage completely. The ACA included a similar tax, called the Cadillac tax, which has been delayed until 2020.

    According to the Journal, Senate Republicans are aiming to pass their health reform bill by the end of June (Armour/Peterson, Wall Street Journal, 6/1; Nather, "Vitals," Axios, 6/2; Scott tweet, 6/2).

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