The NRF predicts that a health benefits tax exclusion cap will not reduce health care costs.
The National Retail Federation (NRF) has requested that the proposals to cap the exclusion of employer-provided health benefits from federal income tax be rejected by the House Ways and Means Committee.
“Favorable tax treatment today supports health coverage for more than 175 million working Americans and their dependents,” NRF vice president for Health Care Policy Neil Trautwein said. “Capping the exclusion – even at a high level – opens the door to widespread disruption of this coverage. It is not a wise direction for policymakers to consider.”
Capping the exclusion was the subject of a recent hearing before the committee. Proponents argue that it is necessary to encourage more cost-conscious behavior by consumers. Retailers have been early and strong adapters of consumer-based health plan designs, such as health savings accounts and health reimbursement arrangements. Such plans are still a work in progress as the complexity of the U.S. health care system and the intrinsically personal nature of health care consumption have slowed efforts to encourage more cost-conscious consumerism.
“We do not believe that capping the exclusion to encourage more individual health policies will reduce health care costs,” Trautwein said. “Consumerism cannot be created merely by legislative fiat.”
“Capping the exclusion would operate as a de facto tax increase for employees without any realistic prospect of wage increases to make them whole,” Trautwein said. “In addition, the recognition of health benefits as income together with any associated wage increases would increase payroll tax exposure for retailers and their employees.”
“It is a classic but unfortunate lose-lose scenario,” Trautwein said.
In a post-Affordable Care Act environment without mandatory individual participation, employees will become even more resistant to increases in their share of the cost of employer-sponsored benefits.
“There is real potential for adverse selection as younger, healthier employees migrate away from health plan benefits,” Trautwein said. “Once the employer-based health care system unravels, there will be no way to call it back. With all of its faults and burdens, employer-based coverage is still superior to individual-based policies.”
NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the U.S. and more than 45 countries.