Employers overwhelmingly oppose taxing employer-provided health care benefits, according to recent research from Lockton. The survey found that more than 92 percent of responding employers are against any policy that would tax workers, their families, and employers on a portion of health plan premiums.
Policy makers have been considering imposing additional income and payroll taxes on employees and payroll taxes on employers. These taxes would apply to at least a portion of health insurance premiums. Lockton noted that more than 177 million Americans receive health insurance through an employer, and employers pay more than $668 billion annually to insure their employees. Under current tax law, those benefits are provided without employers or employees paying any income or payroll taxes on them.
Some lawmakers and think tanks argue that taxing group health plans will drive down overall health costs because it will decrease consumer demand for health care. They also argue that employers—if they reduce benefits to avoid the tax—will increase wages to make up for the reduction in health benefits. However, the survey found the following:
• Three quarters of respondents said they would definitely reduce benefits or consider it, to avoid triggering new taxes on health benefits. Nearly 90 percent indicated they would avoid increasing benefits if it meant triggering a tax.
• Taxing health insurance is unlikely to lead to higher wages. Of more than 800 Lockton survey respondents, the majority said they would definitely or probably not increase wages as a result. Only 6 percent said they would increase wages to make up for a reduction in benefits.
“With healthcare costs steadily rising, this survey indicates that taxing employer-provided benefits would cause millions of American workers and their families to take it on the chin” said Bob Reiff, President of Lockton Benefit Group. “They’d suffer either through a shift in health care expenses, like higher deductibles and other out-of-pocket costs, or they would pay higher taxes. Taxing families on their group health insurance seems inconsistent with sound and effective policy.”
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