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(Washington D.C.)- A report released yesterday reaffirmed Representative Joe Courtney’s (D-CT) and Rep. Sandy Levin’s (D-MI) opposition to the Senate’s proposed excise tax on high-cost health plans in any health care reform legislation. The report was conducted by Mercer, a global human resources consultancy that has conducted a comprehensive annual survey of employers to collect information on employer health plans for over 20 years. The independent study demonstrates that the excise tax on high-cost health care plans will have a negative impact on middle class and working families and found that nearly two-thirds of employers would cut covered benefits to avoid paying the tax.
Representative Courtney stated, “This study concludes what we have been saying all along, that there is a fundamental flaw in the Senate’s proposed excise tax, and it unfairly raises the cost of health care plans for working families. This most recent report indicates that many employers would choose to cut benefits rather than pay any excise tax, which undermines the principals behind health care reform and providing all Americans with quality and affordable health care coverage.”
Representative Levin stated, “Health care reform should be about improving benefits, not cutting them. The results of this survey show that a majority of employers would respond to the tax by cutting benefits and increasing costs for workers. Some analysts have argued that employers will increase wages to the same degree that they decrease health benefits, but this report found that 84% of employers do not expect to raise wages to compensate for reduced benefits.”
Currently under consideration in the Senate’s health care reform proposal is an excise tax on high-cost health plans. Under the Senate’s proposal, the Patient Protection and Affordable Care Act (H.R. 3590), a 40% excise tax would apply to individual plans that exceed $8,500 and to family plans that exceed $23,000. For employees that work in high risk fields and retirees over the age of 55, the 40% excise tax will apply to individual plans that exceed $9,850 and $26,000 for family plans.
Click here for a copy of the Mercer report
The independent Mercer report states what conventional wisdom would suggest about the proposed excise tax: health care costs will be shifted to employees by cutting benefits. The survey, which polled 465 employers in small, mid-sized, and large firms, stated that 63 percent of respondent would cut health benefits to avoid the Senate’s proposed excise tax on high-cost insurance plans. The survey went on to state that 23 percent of respondents reported that they would maintain their current plan, but pass along the cost of the tax to their employees. 7% reported that they would terminate the plan completely. 75 percent of those that reported that they would cut benefits as a result of the excise tax said they would accomplish this by raising insurance deductibles and copays.
Even more concerning than cost-shifting to employees as a result of the tax, the survey confirmed that these cuts will not likely be made up with higher pay. According to the survey, only 16 percent of respondents said they would pass along cost savings from less expensive employee health insurance plans into higher pay.
While the response from large employers indicates that a minority will implement cost-efficiency measures to bring down the price of their plans, the study shows that in the vast majority of cases the burden of this tax will fall on employees in the form of higher costs and reduced benefits.
Mercer conducts a comprehensive annual survey of employers to collect information on employer health plans, including costs and cost management, plan provisions, strategic planning, and scope and limitations of coverage. Mercer also conducts ad hoc surveys on timely topics, including this most recent survey on health care reform.
On October 7, 2009 Representative Courtney spearheaded a letter to Speaker Pelosi in opposition to an excise tax on high-cost health care benefit plans. Congressman Courtney was joined by 186 colleagues that signed onto the letter. Congressman Levin has been a leading vocal opponent of the Senate’s proposed excise tax in the House.
For a copy of Rep. Courtney’s letter click here
Additionally, at the request of Representative Courtney the nonpartisan Joint Committee on Taxation (JCT) released a report on October 20, 2009 that also confirmed the damaging effects of the Senate proposed excise tax on middle class and working families.
Click here to view the JCT report
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