NEWS RELEASE

September 22, 2009
PR-09/28
For additional information:
Jason Hammersla
202-289-6700
jhammersla@abcstaff.org

Senate Finance Committee health reform bill includes flawed tax policy

WASHINGTON, D.C. — “The best reform options are those that preserve and strengthen the voluntary role that employers play as the largest source of health coverage for most Americans. By keeping employers engaged as sponsors of health coverage, we also keep the innovation and expertise employers bring to the table in the collective effort to achieve broad-based, practical health system reform,” said James A. Klein as the Senate Finance Committee began consideration today of the America’s Healthy Future Act.

“Cost containment should be central to any broad-based health system reform. One of the many strengths of our voluntary employer-based system is that group purchasing lowers health care costs because employers, especially larger employers, are able to effectively pool the health risks of employees,” Klein said. “In addition, employers are demanding purchasers of health care services, increasingly focused on leveraging their health care dollars by partnering with those who can demonstrate proven value and improved health care status for employees and their families.”

The Council is urging the Senate Finance Committee to reject amendments that would impose the kinds of employer mandates found in the House tri-committee and Senate HELP measures. “Ultimately, if unintentionally, the cumulative effect of these requirements will result in a net reduction in employer-sponsored coverage by leading some employers to simply ‘pay’ rather than ‘play’", Klein added.

Most significantly, the Council has strong concerns with the tax on “high cost” plans and how it could lead to a number of complex and inequitable results. If the committee nonetheless moves forward on the excise tax, the Council suggests seven specific revisions to make it fairer, less disruptive and less likely to result in unintended consequences for employers, employees and retirees.

• Exempt retiree health plans from the excise tax so that employers who offer these valuable plans are not penalized for doing so and so that the tax does not further contribute to the costs of these benefits or employers’ liability for sponsoring them;
• Increase the tax thresholds to a higher initial level so that far fewer plans would face immediate taxation in 2013;
• Index the tax thresholds by the medical component of CPI, or at a minimum, by a blend of the CPI and the medical component of CPI;
• Do not count employee contributions to health care coverage (whether paid by salary reduction on a pre-tax basis or an after-tax basis) in determining the amounts applied toward the thresholds;
• Do not count contributions to flexible spending arrangements, health savings accounts, dental, vision or other supplementary benefits in determining amounts applied toward the thresholds;
• Maintain the initial year increase in the thresholds for high-cost states on a permanent basis; and
• Exempt employers from the excise tax if they offer multiple plan options that have an aggregate average value below the tax thresholds.

“The Chairman’s mark, while not perfect, remains the most promising vehicle for achieving broad agreement on health care reform this year,” said Klein. “As lawmakers refine the bill, we urge the committee to be mindful of employers’ role in providing generous, valued health care benefits to hundreds of millions of Americans.”

For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at 202-289-6700 (office) or (202) 253-5458 (cell).

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council’s members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.