Republican senators consider tax on employer-sponsored plans in healthcare bill rewrite

The Senate side of the United States Capitol in Washington, D.C.
Senators are looking at potential taxes on employer-sponsored insurance in its health reform bill.

Republicans in the Senate are looking at potential taxes on employer-sponsored health plans as a way to achieve budgetary savings in a repeal of the Affordable Care Act.

Taxing employer plans would likely meet strong resistance from business and workers’ groups, but despite the potential drawbacks politically, some senators are beginning to offer lukewarm support for the proposal as they await more details, according to an article from The Wall Street Journal. The taxes are one of many ideas the Senate’s working group is sifting through as it crafts that chamber’s health reform bill.

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The vast majority of insured Americans get their coverage through an employer, with their insurance payments taken out before taxes. Economists argue that this raises premiums and encourages wasteful spending because employers have incentives to offer more generous plans.

GOP members of Congress have long expressed an interest in limiting the exclusion, but it is a politically dangerous move, the publication notes. Drawing the ire of business groups could be problematic for a bill that in its current form is already maligned by the public and almost every major healthcare industry group.

“If you start taxing workers for health benefits, you’re really expanding the number of people affected by these proposals,” Larry Levitt, a senior vice president at the Kaiser Family Foundation, told the WSJ.

The Obama administration faced similar political backlash over the Cadillac tax. A bipartisan group looked to amend the ACA tax, which would apply a 40% levy on high-cost health plans, but the administration opposed any changes. It has been delayed until 2020, and the House of Representatives’ American Health Care Act would further delay it until 2025.

Senators working on the bill are also debating key components that would impact Medicaid expansion and consumer protections for people with pre-existing conditions. The Senate expects to put forward a more moderate bill than the House, but a rocky road for the rewrite lies ahead, as the Senate can only afford to lose two votes on the bill if they want to pass it through budget reconciliation.