The Hill, James Gelfand, August 29, 2017
Some will be tempted to merely throw more money and the semblance of flexibility into a broken system — we urge them to reject this Band-Aid, and to instead implement real reforms. The ERISA Industry Committee (ERIC) implores Congress not to miss this opportunity to protect the employer-sponsored health insurance system, which is the single most common source of health coverage in the nation, providing 178 million Americans with access to healthcare.
Congress is focused on stabilizing endangered exchange marketplaces. ERIC heartily agrees that market stabilization is important for everyone, but addressing the cost sharing reduction (CSR) payments to insurance companies is just a small part of solving the problem.Last month, ERIC, along with several other organizations, sent a letter to Congress with policy recommendations that would help stabilize the market, while also ensuring the future of affordable employer-provided health benefits.
We recommended Congress should fund CSR payments to improve affordability in the individual market. Congress should also repeal the 40 percent “Cadillac” tax on employer-sponsored health plans, with no new taxes on health benefits. And lawmakers should repeal the health insurance tax on fully insured health plans, which a recent Oliver Wyman study found will cost Americans $22 billion next year alone. They should also enable employers to innovate with Health Savings Accounts (HSAs) and protect the ability of employers to offer uniform benefits to employees and their families — no matter where they live, work, or receive medical care.
Tax relief is key to protecting the employer-sponsored system. Since World War II, the American tax code has encouraged employers to set up quality health plans for their employees by exempting company health benefit expenditures from income and payroll taxes. The Affordable Care Act placed a crippling financial burden on plan sponsors through the employer mandate and the taxes mentioned above.
An easy place to start would be fully repealing the highly unpopular Cadillac tax. It has already been delayed until 2020 and lawmakers have voted to repeal it twice. The first time in 2015 and the most recent during the healthcare votes this past July.
The Cadillac tax will hit more than 50 percent of the workforce within ten years of its implementation, according to a January study by the consulting firm Milliman —that’s 60 million Americans. These employees could see their benefits slashed by thousands of dollar while their salaries stay flat.
Some economists theorize that because of the Cadillac tax, workers might see their pre-tax wages increase as employers switch to cheaper plans. But if that happens, employees would also pay a lot more in taxes, costing 12.1 million employees upwards of $1,000 in higher payroll and income taxes.
In fact, 80 percent of the revenue raised by the Cadillac tax is expected to come from workers paying more income and payroll taxes, according to the Joint Committee on Taxation and the Congressional Budget Office.
Aside from health tax relief, another way to improve the healthcare system is updating consumer-directed health options like Health Savings Accounts (HSAs). The Committee and Congress should raise HSA contribution limits, ensuring that HSA and high-deductible plan beneficiaries have access to supplemental benefits. They should also allow consumers to use their HSAs to purchase over-the-counter medicines while updating rules to ensure those enrolled in HSA-compatible plans can benefit from first-dollar coverage for prescription drugs and other medical products and services likely to prevent or reduce catastrophic episodes in the future.
The Senate HELP Committee must also look at value-based healthcare options, which are ways plan sponsors and consumers can spend healthcare dollars smarter. Earlier this year, The ERISA Industry Committee and the Pacific Business Group on Health launched the DRIVE Health Initiative, a campaign to accelerate economic growth by controlling health costs and improving quality through the rapid adoption of value-based healthcare. The initiative calls for targeted deregulation and the use of market-based purchasing strategies by Medicare and other federal health programs.
Fixing healthcare is not easy. As lawmakers move forward in crafting new legislation, they must be sure it protects the employer-sponsored system that has provided affordable, quality coverage to more than half of the population for decades and allow for continued improvement and innovations.
If they don’t, the employer-sponsored health insurance system could be in jeopardy, creating a much bigger problem than that of the ACA exchanges.
James Gelfand is the senior vice president for health policy at The ERISA Industry Committee (ERIC). ERIC is the only national association that advocates exclusively for large employers on health, retirement and compensation public policies at the federal, state and local levels.