GOP budget would cap tax exclusion for employer-provided healthcare
A new budget proposal from a large group of House Republicans would, among other health policy changes, cap the employee tax exclusion for employer-provided healthcare benefits. The proposal comes from the Republican Study Committee (RSC), a bloc that includes most Republicans in the House, including every member of House leadership. While the fiscal 2025 budget plan won’t become law this year, it offers insight into how Republicans could seek to govern if they win control of Congress and the White House in November’s elections.
The RSC proposal argues that the employee tax exclusion for employer-provided healthcare promotes job lock and lower wages and “has prevented the organic development of a competitive, transparent, and accessible health care market.” Instead of repealing the exclusion entirely, however, the RSC proposes to cap the exclusion at an unspecified level and extend the same tax treatment to everyone regardless of where they purchase coverage.
The Alliance to Fight for Health Care, a broad-based coalition initially formed to oppose the Affordable Care Act’s (ACA) now-repealed “Cadillac” tax on employer coverage and of which Mercer is a member, blasted the RSC proposal.
It is deeply concerning that the RSC has proposed to tax the health care of working Americans to fund other spending priorities, the group said in a statement. The Alliance cited a Mercer analysis of an earlier Republican proposal to cap the exclusion showing that it would create a large tax increase for low-income working Americans. “We strongly discourage Members of Congress from pursuing this recommendation,” the Alliance added.
The RSC doesn’t urge repeal of the ACA but does propose repealing all its tax increases, reducing its “regulatory mandates,” and giving states more leeway to pursue their own healthcare reforms under the law’s “Section 1332” waiver process. Additional proposals in the RSC budget plan would liberalize rules governing health savings accounts (HSAs) – including eliminating the requirement that they be connected to a high-deductible plan -- expand association health plans, and strengthen application of federal antitrust laws to the health insurance industry.
The RSC plan’s approach to the ACA appears consistent with the position of former President Donald Trump, who recently dropped his call to repeal the law, saying in a social media post last week that he’s “not running to terminate” the ACA but to make it “much, much better."