More than a hundred members of both parties are urging the super committee to avoid tinkering with the employer tax subsidy for health care coverage, warning that any changes to the long-standing system “would have far reaching consequences that would not only reduce health coverage for millions of Americans, but would also increase long-term federal spending obligations,” the Hill’s Julian Pecquet reports. From the letter:
Considering the tax exclusion is the lynchpin of this framework, capping or eliminating it would erode our largest system of health coverage and incentivize employers to drop or to curtail coverage. For their workforce, substitute coverage would only be available through the individual market, where comparable coverage is more expensive for most consumers– even as new options become available under the Affordable Care Act. And, due to the realities in our insurance system, the change would impact more vulnerable demographics of working Americans to a greater degree than others. [...]
A study on the high-cost health plan tax conducted by the American Academy of Actuaries concluded that the proposal would disproportionately impact early retirees by a striking margin, not because their plans are more generous, but because they are actuarially more expensive to cover. The report also concluded that small businesses and high-risk professions would also be disproportionately impacted, again, not based on generosity of benefits, but because of longstanding actuarial realities.
The GOP’s opposition to ending the tax exclusion is significant, since several prominent Republicans have proposed replacing the Affordable Care Act with a “market based” health care solution that ends the employer tax subsidy and provides tax credits that would allow families and individuals to purchase health insurance coverage on the individual market. Republicans in the House also voted for a very similar plan in 2009 as part of their alternative to Obama’s health reform legislation.
During a speech at the Heritage Foundation earlier this month, Sen. Orrin Hatch (R-UT) strongly came out against the idea, arguing that such a proposal would “disrupt this whole country.”