Debate: Should Employees Get a Health Insurance Tax Break?
Their Reasons:
Byrnes: For decades, employers have reaped the tax advantages associated with employer-sponsored health insurance. Yes, health insurance is an extremely valuable employer-provided benefit. However, the funds, in the end, go to insurance companies, not to employees. For some employees, the system works perfectly. However, that assumes that employees’ needs are being met via the health coverage they are given — and that the money spent on the insurance isn’t simply wasted because the employee isn’t using the coverage.
Bloink: Employer-sponsored health insurance is critical to this nation’s health insurance program. Creating an entirely new system where employees receive a federal tax benefit for purchasing health insurance would take decades. It would undoubtedly be incredibly complicated and difficult for employees to navigate. Most importantly, many individuals would lose their valuable health insurance coverage in the interim. We can’t assume that employees would take the time to shop around and locate the plan that best suits their needs. Many would simply become uninsured.
Byrnes: Under the current system, employees have little choice but to accept the program chosen by their employer. That results in an inefficient system where employees — who are in the best position to make their own health-related choices — must simply accept what they’re given. This type of inefficient and ineffective system inflates the cost of health insurance for everyone.
Bloink: Employers are in the best position when it comes to negotiating favorable rates with powerful insurance companies and getting employees the quality health insurance they deserve. Without that bargaining power, health insurance would increase for everyone. That’s one reason why the ACA employer mandate and the tax benefits realized by the employer remain so important.
Byrnes: Health insurance coverage should be treated as a part of the employee’s compensation. The most effective system would be one where the funds that employers spend on health coverage are simply paid out to the employees as compensation in the form of increased wages and salary — or even deposited in HSAs for the employee to control. Were the tax benefits associated with health insurance then transferred to the employee, employees would have the incentive to choose their own health insurance rather than relying on employers to make those choices for them.
Bloink: We already have tax-preferred options that give Americans the choice to make tax-advantaged contributions to a variety of different types of health savings vehicles. These vehicles allow employers to take control over their health spending. Taking away the employer’s incentive would result in a situation where millions of Americans lose their health coverage and flood the individual markets — or, in reality, elect to remain uninsured, often transferring the cost of their health care to those individuals who do continue to purchase health insurance.
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