The Senate Turns Its Eye To Employer-Sponsored Health Insurance Plans

Friday, 02 June 2017 15:29 Written by  Patricia Collins

Earlier this week, the Wall Street Journal reported that Senators are considering a tax on employer-sponsored health insurance plans to raise revenue.  It is not my intention to discuss the politics of this proposal, and instead, I write to consider how such a proposal would alter the economics of recruiting and retaining employees.
 
Until now, it went without question that those who secured health insurance through their employers did so on a pre-tax basis.  Employers, for their part, can deduct the cost.  This incentivizes employers to offer health insurance coverage to employees as part of a compensation package.  Health benefits are hugely important to employees when deciding whether to accept new positions.  As such, these plans are powerful recruitment and retention tools. 

In my practice, time and again, I hear that talented and experienced employees do not want to leave their current employment, not because of well-drafted restrictive covenants (as many employers believe), but because of their compensation package, that includes health insurance.  Spouses and children may have medical conditions that require care, and employees resist the stress of leaving behind good coverage for new jobs or self-employment. Employees believe, in many cases correctly, that the cost of health insurance is cheaper through employer-subsidized plans than in the individual market, and that they can get better coverage for their dollar through their employer. 

This is particularly true right now, as the healthcare debate rages on, and employees feel insecure about how their health insurance will work in the future.  The Senate’s proposal would remove a tool from an employer’s recruitment arsenal, and dramatically change the economics of recruiting and retaining talented employees.  Of course, employers have other tools, and should not rely totally on health insurance, but it is hard to overstate the importance of this coverage to employees.  The implementation of such a tax would mean that employers would need to reconfigure compensation packages and rethink the manner in which they provide health insurance coverage to employees.

Lawmakers have referred to the tax-favored treatment of employer-sponsored health insurance plans as discriminatory to those who purchase their health insurance individually.  Interestingly, removing these tax protections would also remove the incentive for employers to provide such healthcare.  It would be interesting to know from these lawmakers if that is what they intend.  A move away from employer-sponsored health insurance does not just change the economics of the employment relationship; it changes the economics of healthcare. 

Of course, the healthcare debate impacts employer / employee relationships even as the status of the Affordable Care Act and employer-sponsored health insurance remains unclear.  It is simply impossible for employers, or for their lawyers for that matter, to plan for changes in healthcare while proposals are floated and then rejected by lawmakers.  However, the proposal to end the tax-favored treatment of employer-sponsored health insurance would mark a radical change.  It will be interesting to see if it makes its way out of the pages of the Wall Street Journal. 

Patricia Collins

Patricia Collins

Patty has been practicing law since 1996 in the areas of Employment Law, Health Care and Litigation, with extensive experience in advising employers and health care providers as well as complex litigation in federal and state courts. Patty’s knowledge of employment law includes the Employee Retirement Income Security Act; federal and state employment discrimination laws, and employment contracts and wage claims.

To view Patricia Collins' full profile, click here.

Leave a comment

Blogger Bios

  • Alan Wandalowski Alan Wandalowski
    Alan concentrates his practice in Estate Planning, Estate Administration, Elder Law, Estate…
  • Bill MacMinn Bill MacMinn
    Bill concentrates his practice in the area of litigation, including Commercial Litigation,…
  • Christopher D. Wagner Christopher D. Wagner
    Christopher Wagner is an experienced and results-driven business law attorney with a comprehensive understanding…
  • Elaine T. Yandrisevits Elaine T. Yandrisevits
    As an estate planning attorney, Elaine Yandrisevits is committed to guiding individuals…
  • Elizabeth J. Fineman Elizabeth J. Fineman
    Elizabeth Fineman concentrates her practice on domestic relations matters and handles a…
  • Gabriel Montemuro Gabriel Montemuro
    Gabe’s practice focuses on litigation, including commercial litigation, personal injury, estate and…
  • Jamie M. Jamison Jamie M. Jamison
    Jamie Jamison is a supportive, knowledgeable advocate to clients experiencing the challenges…
  • Jessica A. Pritchard Jessica A. Pritchard
    Jessica A. Pritchard, focuses her practice exclusively in the area of family…
  • Joanne Murray Joanne Murray
    Joanne concentrates her practice in the areas of Business Law, Business Transactions,…
  • John Trainer John Trainer
    John’s concentrates his legal practice in estate planning, estate administration and elder…
  • Mariam Ibrahim Mariam Ibrahim
    Mariam Ibrahim is dedicated to helping clients and their families navigate the…
  • Michael Klimpl Michael Klimpl
    Michael’s practice areas include Real Estate, Municipal Law, Zoning and Land Use, Employment…
  • Michael W. Mills Michael W. Mills
    Mike is devoted to helping businesses build value and improve working capital,…
  • Patricia Collins Patricia Collins
    Patty has been practicing law since 1996 in the areas of Employment…
  • Stephanie M. Shortall Stephanie M. Shortall
    Throughout her career, Stephanie has developed a practice focused on advising closely…
  • Susan Maslow Susan Maslow
    Sue concentrates her practice primarily in general corporate transactional work and finance…
  • Thomas P. Donnelly Thomas P. Donnelly
    Tom’s practice focuses on commercial litigation and transactions. In litigation, Tom represents…