CIAB: ‘We feel vulnerable’ on tax-favored status of employee benefits
There have been multiple proposals on Capitol Hill during healthcare reform discussions to alter the tax-favored status of employer provided benefits.
To date, nothing has moved forward on those proposals, but The Council of Insurance Agents & Brokers Senior Vice President Joel Wood is not letting his guard down. Preserving the tax-favored status remains the Washington, D.C.-based group’s top priority — and concern.
EBA spoke with Wood to understand more about the issue and what advisers should be doing. What follows is an edited version of the conversation.
EBA: What issue is CIAB keeping their eye on this year?
Joel Wood: The ACA/AHCA and now Senate efforts are very much dominating the conservation among our 200 member firms and what we are trying to respond to. While everyone agrees that it is very difficult to envision how you get to those 51 votes in the Senate, a lot of people didn’t think they would get to a second vote on the AHCA in the House. We have to assume the Senate is going to make a very serious drive and come up with a package that could fly. In that regard, we continue to feel very vulnerable. By far, the most important mantra we have as an organization is to preserve the employer-based private healthcare delivery system.
Taxation of benefits has always been a top concern. I’m not saying we feel naked, but we feel vulnerable. All we are trying to do is keep that drumbeat going on whatever Congress decides to do to resolve issues associated with exchanges, high risk pools, Medicaid. [We want to ensure that Congress does not] solve those problems at the expense of the employer-provided system.
EBA: What are some threats that concern you?
Wood: We are in the midst, as Aetna CEO Mark Bertolini has publicly talked about, a death spiral in the exchanges and the individual market. In the absence of reforms that can bend the healthcare cost curve over the longhaul, we do worry about the evolution of a single-payer type of option. Again, we are not running around with our heads cut off, we are not quite ready to set our hair on fire and run screaming naked through the hallways of Congress on it, but we are concerned.
What we fear would put us on that path is taxation of benefits. Today, 177 million Americans receive their health insurance through their employer. Most like their insurance and want to keep it. Every reader of EBA knows that every time Medicare and Medicaid are under reimbursed, the private system and employer-sponsored coverage picks up the slack.
EBA: What is taking place in the employer community?
Wood: We feel vulnerable even though we were very happy they moved away from the first AHCA discussion draft that lowered the tax exempt portion of employer-sponsored coverage.
In many ways I feel that the employer community has lost the conservative/libertarian economic intelligentsia on the issue of employer-sponsored coverage. Too often with Congressional leaders, I hear references to wanting this to be a balanced approach to the employer-sponsored coverage because individuals don’t get that full tax credit for their purchase.
Well, that’s an issue and there is just a lot that worries us about purest consumer-driven health insurance arguments that many Congressional leaders tend to advance. As much as we deeply admire and have a great working relationship the chairman of Senate Finance Committee, Orrin Hatch of Utah, he has proposed legislation that would move the employer expectation down from 100% to 80%.
The reason that I’m paranoid is that the way reconciliation works, the Senate is going to have to make up the difference in Medicaid. If anything, the Senate bill will be more moderate. Let’s say their cost savings are only $600 billion in Medicaid, scored by CBO. That means they have to make up the difference because of the reconciliation rules. They have to find a couple hundred billion dollars in revenue.
It worries us and we think the employer-community has to be much more assertive on the reality that scaling back the employer exception is going to mean a payroll tax increase for 177 million Americans.
EBA: How should employers get involved?
Wood: We have our legislative conference, as do other agent groups, such as NAHU, NAIFA and The Big ‘I.’ Everybody has their talking points and we pretty much agree on things, but we have different areas of emphasis.
We all have grassroots operations and we deploy them from time-to-time. Thus far, this is the No. 1 thing we are deploying on. I would urge more firms to follow the example of Lockton. It is the only large firm that I am aware of that took the case to their clients. They produced material. They got tons of facts and figures and identified the threat to their clients. A lot of brokers are reluctant about engaging their clients on a public policy issue.
I think that brokers should not be reluctant to turn to their clients and let them know. We hear a lot from AARP, the medical organizations, the drug companies and a lot from the health plans. We are all engaged on Capitol Hill. There are excellent organizations like American Benefits Council, the Employer Committee on Health. There needs to be more urgency within the employer community on not going there on taxation.