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ACA Replacement Would End Mandates, Add Tax on Benefits
By Stephen Miller
From Society for Human Resource Management on Monday, June 27, 2016
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By eliminating the employer mandate, the proposal would also do away with the ACA’s complicated administrative burdens for employers, including the complex IRS reporting process. That would mean no more “tracking and reporting employees’ hours, and managing the hours of part-time employees to ensure they don’t trip over the 30-hour-a-week demarcation that defines full-time employees,” said Steve Wojcik, vice president, public policy at the National Business Group on Health (NBGH) in Washington, D.C, which represents large employers.

“Given the pressures on the budget and the deficit, when the federal government thinks of ways to raise revenues, this is a tempting source,” said Wojcik. “To start down that road could lead to taxing benefits for the average working person, and increasing their tax liability significantly, especially if health care costs continue to grow two to three times faster than the overall growth in wages.”

The proposal addresses the employee tax exclusion for employer-paid premiums, not an employer’s ability to deduct premiums as a business expense, Wojcik said. “But if employees are being taxed for their health benefits, employers will be pressured to adjust compensation to keep them whole,” he noted.

Rather than taxing benefits in an effort to restrain spending and control costs, Wojcik favors steps such as reforming fee-for-service payments that “encourage providers to use more expensive care in more expensive settings when lower-cost alternatives of equal or better quality exist.” Making legislative changes to remove “perverse incentives” in the Medicare and Medicaid system could promote payment reform more generally, “making it easier for employer plans, working with their insurance carriers, to adopt the same kind of payment mechanisms,” he noted.

Likewise, Wojcik said the NBGH supports those recommendations and expanding the flexibility of HSAs.