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ACA repeal threatens tax-free health benefits

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in Compensation and Benefits,Human Resources

Since the Affordable Care Act was enacted in 2010, employers have been interested in the political debate surrounding the health care reform law but not particularly engaged. The reason is simple: The ACA mainly affects the individual health insurance market, not the employer-provided coverage that is central to most employee benefits plans.

That’s changing as President Trump and Republicans on Capitol Hill set about repealing and replacing the ACA. After they have stripped away many of the law’s revenue-generating provisions, Republicans will need a way to pay for a replacement plan.

The most obvious target, employers fear: The tax-favored status of employer-provided health benefits.

Since 1939, neither employers nor employees have paid income tax on the value of health benefits. According to the Congressional Budget Office, the exclusion cost Uncle Sam $260 billion in 2013.

Recouping even a portion of that revenue could help pay for popular ACA features that will vanish if the law is repealed.

Employers aren’t going down without a fight.

On March 13, a coalition of 27 business groups—including the Society for Human Resource Management, the American Benefits Council, the National Business Group on Health and the U.S. Chamber of Commerce—launched a major lobbying effort dedicated to “protecting the long-standing tax treatment of employer-sponsored coverage.”

In outreach to both the White House and Congress, the groups argue that taxing employer-provided benefits will raise health care costs across the board—and will amount to a massive tax increase for middle class Americans.

“We understand that crafting a new health care reform bill is a challenging task, but some things are obvious: reform should not destabilize the successful employer-sponsored system, and it certainly should not do so by taxing employees on their valued coverage,” said American Benefits Council President James A. Klein.

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