Filed Under:Markets, Employee Benefits

GOP considers cap on favorable tax treatment of health insurance

The Affordable Care Act change war

Rep. Kevin Brady, R-Texas, shown above, is one of the leaders of efforts to come up with an Affordable Care Act alternative. (Photo: House)
Rep. Kevin Brady, R-Texas, shown above, is one of the leaders of efforts to come up with an Affordable Care Act alternative. (Photo: House)

(Bloomberg) — Republicans are looking at capping a health insurance tax exclusion used by employers that’s worth hundreds of billions of dollars a year, as a way to pay for changes to the U.S. health care system, four members of Congress said Thursday after a party meeting on Capitol Hill.

Related: 18 federal health budget cut options

The proposal, still under development, would limit the amount U.S. employers can exclude from workers’ taxes for the health insurance benefits they provide. Excluding premiums from taxes was worth about $250 billion in foregone tax revenue in 2013, according to the Congressional Budget Office. Some health economists have argued that the exemption artificially drives up health spending.

The proposal is on “a menu of pay-fors” Republicans are considering as they debate changes to the Affordable Care Act and how to fund them, Rep. Bill Flores, a Republican from Texas, said after a gathering of House Republicans in Washington on Thursday. The proposal was also described by House Ways and Means Chairman Kevin Brady, of Texas, Peter King of New York, and Pat Tiberi of Ohio.

“No decision’s been made, we’re really looking at a whole range of options,” Brady said in an interview after the meeting.

Federal revenue gained from taxing the benefits could be used to pay for changes to the Medicaid program for the poor, and to provide tax subsidies to help people buy health insurance on their own, proposals Republicans are debating as part of a package meant to replace or amend the Affordable Care Act.


CBO identifies targets for health spending cuts

Congressional wonks: Health tax breaks not so costly

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