AHPI Governors Weigh In on House Republicans' Plan to Cap Health Care Tax Exclusion

June 24, 2016

This week, representatives of House Speaker Paul Ryan (R-WI) and Ways and Means Committee Democrats discussed at the Annual American Health Policy Institute Governors' Meeting the House Republicans' plan to repeal and replace the Affordable Care Act, with member companies expressing strong concerns about the proposed cap on the current tax exclusion for employer-provided health benefits.  While the plan, which was unveiled a day before the meeting, lacks many details, it could provide a starting point for the next round of debate under the next administration.  The plan repeals all of the ACA's taxes, including the Cadillac Tax, and employer mandates, but would then restore some of its most popular elements, including allowing young adults to stay on their parents' health plan to age 26.  At its core, the plan provides a universal advanceable refundable tax credit to individuals and families that is adjusted for age.  However, it is unclear how this could impact employer-provided coverage.  Importantly for employers, the plan: 

  • "Strongly supports employer-based care and recognizes the certainty and stability job-based health insurance offers;" 
  • Caps the tax exclusion for employer-sponsored health benefits "at a level" that will not impact the "vast majority" of plans, but provides no dollar amount; 
  • Would adjust the tax cap for geographic differences in health care costs that could complicate administrative burdens; 
  • Does not include employee contributions to HSAs as part of the tax cap, but is silent on employer contributions; 
  • Says nothing about how the tax cap would be indexed for inflation; and
  • Does not explicitly address ERISA. 
Groups such as the National Coalition on Benefits, of which the Association is a member, have released statements generally praising the plan while similarly raising concerns about the proposed tax cap.  Other topics covered at the meeting, led by AHPI Chair Marc Reed, Chief Administrative Officer of Verizon Communications Inc., and AHPI CEO Tevi Troy, included:
  • A conversation between HR Policy CEO Emeritus Jeff McGuiness and Dr. Glenn Steele, Vice Chair of the Health Transformation Alliance, on effective ways to achieve health through innovations in health care delivery and financing; 
  • An update and discussion on key health policy issues, such as employers' fiduciary duties under ERISA;
  • AHPI's position on the tax treatment of employer-sponsored health benefits; and
  • A look forward at what lies ahead in health policy.