SHRM survey respondents believe taxing insurance contributions will raise health care costs for employees

A majority of respondents to a new Society for Human Resource Management (SHRM) survey anticipate that employees will pay more for health insurance if Congress decides to tax insurance contributions. As the Trump administration and Congress negotiate elements of health care and tax reform, there likely could be changes to the tax treatment of employer-sponsored health benefits. Currently, premiums that employers pay for health insurance are exempt from federal and payroll taxes, and employee premiums are not considered taxable income.
Two-thirds (67 percent) of respondents to SHRM’s Health Care Reform Survey said employee health insurance premiums would increase, and 60 percent expected an increase in out-of-pocket health care costs if employer and employee insurance contributions were taxed.
“A majority of HR professionals surveyed by SHRM indicated that if Congress changes the tax treatment of employer-sponsored health care, employees will see an increase in their costs,” said Evren Esen, SHRM’s director of workforce analytics. “That could have an adverse impact on the health care coverage offered by employers.”
As Congress acts to repeal and replace the Affordable Care Act (ACA), the survey also found that HR professionals consider prohibiting the exclusion of pre-existing conditions as the most important element of the law. Eighty-three percent of respondents said it was important that individuals with pre-existing conditions not be excluded from health coverage.
Respondents also cited preventive care coverage (52 percent), no lifetime limits (37 percent) and benefits for dependent children up to age 26 (37 percent) among the most important elements of the ACA.
Health care costs in 2017 increased for 79 percent of respondents. These employers reported an average 11 percent increase in costs.
Over one-half (55 percent) of responding organizations changed their health care coverage in 2017. Of those, 39 percent modified their existing health plans and 17 percent added new health plans.
One element of the ACA being debated on Capitol Hill is the so-called Cadillac tax, an excise tax of 40 percent that would be imposed on high-value health benefits. The survey found that 26 percent of employers are awaiting final guidance before making any changes because of the upcoming tax. Eighteen percent of organizations plan to conduct an analysis of the impact of the tax. Fourteen percent of organizations already have acted to avoid paying the tax, and just 1 percent have decided to pay the tax.

SOURCE: Society for Human Resource Management press release, June 13, 2017.
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