Congress May Ruin the Insurance Risk Pool

The employer-based system is highly efficient at providing American workers and their families with affordable coverage options through group purchasing and its associated economies of scale of purchasing power by spreading risk and avoiding adverse selection. The success of this system is possible because of the preferential tax-treatment of employers-sponsored insurance coverage, where employer-paid contributions for an employee’s health insurance are excluded from that employee’s compensation for income and payroll tax purposes. More than 175 million Americans currently receive their coverage through the employer-based system.

NAHU’s  Congress May Ruin the Insurance Risk Pool infographic provides a visual view on what will happen if Congress caps the “employer exclusion,” which allows employers to make tax-free contributions towards employees’ health insurance.  This infographic gives fun examples of Americans by age demographic and profession as well as scenarios of how they would be affected by the employer exclusion.

Eliminating the exclusion would eliminate most of the benefits of employer-sponsored insurance. Employers and individuals would lose many group purchasing efficiencies, and there would no longer be a potent means for spreading risk among healthy and unhealthy individuals. Workers would be less likely to have their employer as an advocate in coverage disputes, and employers would be less likely to involve themselves in matters of quality assessment and innovation for their employees. Employers could also suffer in terms of worker productivity and labor costs because employer-sponsored insurance leads to far more workers purchasing health insurance than they would on their own.  Read More and Take Action

 

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