Earlier this week, NAHU called on members to take action on our latest Operation Shout to tell Congress not to eliminate or cap the employer exclusion. As Congress continues discussions on the future of health reform, many have been considering policy proposals that would eliminate or cap the employer tax exclusion for health insurance. Both of these options would decimate the employer-based system, where more than 175 million Americans currently receive their coverage, and instead turn them over to the individual market. If you haven’t taken action yet on this important Operation Shout to defend the system that has worked for Americans for decades, we encourage you to Take Action now.

The employer exclusion allows employers contributions for an employee’s health insurance to be excluded from that employee’s compensation for income and payroll tax purposes. It is the basis of the employer-based system and has proven highly efficient at providing American workers and their families with affordable coverage options through group purchasing and its associated economies of scale by spreading risk and avoiding adverse selection. Eliminating the exclusion would eliminate the incentive for employer-sponsored insurance, while capping it would degrade the benefit and serve as a tax increase for middle-class Americans.

Eliminating the exclusion would eliminate most of the benefits of employer-sponsored insurance, including the means for spreading risk among healthy and unhealthy individuals and group purchasing efficiencies. Capping the exclusion for employees would devalue the benefit and result in a significant tax increase for middle-class Americans, forcing many to drop employer-sponsored insurance, including dependent coverage. Employers would be incentivized to only offer coverage to their employees that would fall below the value of the cap in order to avoid paying any increased taxes, potentially resulting in a race to the bottom for employers to sponsor insurance that wouldn’t meet the cap’s thresholds and further shifting costs onto employees. Many of the inherent problems with the Cadillac/excise tax would exist for eliminating the employer exclusion, such as setting a tax credit sufficiently high enough to cover the significant contribution made by employers today. Also, indexing a credit would need to be set to medical inflation if it is to keep up with the typical rise in healthcare expenses.

The employer exclusion tax benefit makes employer-sponsored health insurance a valuable benefit for workers. We urge Congress to maintain the system that has worked for Americans for decades, and preserve employer-sponsored health insurance through the continuation of the employer exclusion, because it preserves the employer system for health insurance for the vast majority of Americans. Over the coming weeks, as Congress discusses various healthcare reform proposals, we want to be sure that they hear directly from agents, brokers and employers about the value of the employer tax exclusion. You can help us spread the message by taking action below:

1. Contact your senators and representative. Send an Operation Shout today asking your federal legislators to oppose the elimination or cap of the employer tax exclusion of health insurance in any healthcare reform legislative proposals. You can take action here.
2. Tell your employer clients to take action. Your employer clients would be most directly impacted by the elimination or cap of the employer tax exclusion. Tell them to take action sharing why the exclusion must be preserved in any healthcare reform legislative proposals. Tell them to take action here.
3. Share your story. As a licensed insurance specialist who works closely with employers to help them offer and utilize employer-sponsored health insurance, you know personally about how the employer tax exclusion directly impacts your clients. Stories from your clients will demonstrate the value of the exclusion and the need to preserve it. We will share your stories with appropriate legislators and staff. You can share your story here.

Take action today and tell your federal legislators to keep the employer exclusion tax benefit!