Employers: Altering Tax Exclusion For Employer Provided Health Coverage Would Have Negative Impact

Despite analysis and critique to the contrary, the McCain campaign has consistantly argued that exposing workers health benefits to income taxes would have no effect on employer-based coverage:

Health Policy Adviser Jay Khosla: Employers will continue to deduct health care costs as they do now and hence will have the incentive to provide coverage as a benefit in a competitive workforce market and the employees of course can use their tax credits to maintain their current coverage.

Senior Adviser Douglas Holtz-Eakin: This is actually not a plan that relies on the individual market, it relies on the traditional source of health insurance, which is employers.

Senior Adviser Carly Fiorina: John McCain’s plan builds on the current system and allows for greater choices for American families that more uniquely fit their needs, including allowing families to keep their existing coverage.


But employers beg to differ. According to a survey of 187 benefits officers at large U.S. companies, “respondents clearly rejected the assertion thataltering the tax exclusion for employer provided health coverage would not affect employer sponsorship of plans”:

74 percent: say that a repeal of the employee tax exclusion for employer-sponsored health coverage (a proposal of Republican Presidential Candidate John McCain) would have a strong negative impact on their workforce.

59 percent: responded that their companies would offer a new plan option with less generous benefits.

4 percent: said the current tax treatment for workers is of “little or no importance” in continuing employer provided coverage.

UPDATE: The Health Policy and Communication Blog has more on the “value of employer provided health benefits.”