Democrats Launch Effort to Protect Health Care Tax Exclusion; AHPI Policy Brief Details What's In Leaked GOP Reconciliation Bill

March 03, 2017

Two prominent liberal Democrats—Senators Sherrod Brown (D-OH) and Mazie Hirono (D-HI)—are gathering signatures for a letter they hope to send to the Republican leadership next week, urging them not to cap the tax exclusion on employer-sponsored insurance (ESI), a provision of a leaked version of the House Republicans' budget reconciliation measure opposed by HR Policy.  According to the letter, "While some may argue in favor of capping or even eliminating this important tax provision, poorly crafted changes to the tax exclusion for ESI designed could result in a significant reduction in health care coverage or an enormous increase in the tax liability for millions of middle-income Americans."  Separately, the American Health Policy Institute released an "Employers' Guide to Reforming the Affordable Care Act Through Budget Reconciliation" this week, noting that while the recently leaked House GOP draft reconciliation bill would reduce the employer penalty to zero and repeal the Cadillac and other ACA taxes, it would cap the tax exclusion for employer-provided benefits at the 90th percentile of the cost of self-only and other than self-only coverage.  In other words, the taxes on the kinds of self-insured plans maintained by HR Policy members would go up.  According to the leaked draft, the cap on the tax exclusion is the only source of revenue in the bill to pay for the new tax credits to purchase individual coverage and state innovation grants.  The paper also shows that under congressional budget rules, the vast majority of ACA mandates that concern employers cannot be addressed in a budget reconciliation bill.  This includes all of the benefit mandates, IRS reporting requirements, and waiting period limitations.  Reconciliation measures, which can only include tax and budgetary items, need just 51 votes for Senate passage while 60 are required to change the provisions of most concern to large employers.  Although the ACA’s employer penalties (a tax item) could be reduced to zero, the requirement to offer affordable, minimum value coverage to full-time employees would remain the law of the land.  This could create a potential ERISA private right of action for an impermissible reduction in benefits if employers were to withdraw benefits.  This week, HR Policy Vice President Mark Wilson appeared with other business groups in a bipartisan briefing on Capitol Hill on the need to protect employer-sponsored health care (including tax preferences) in the ongoing debate.