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Wednesday, June 8, 2011

Health Care, the Modern Workforce and Tax Reform

McKinsey Quarterly for June 2011 includes an article - How US health care reform will affect employee benefits. It summarizes a survey of 1,300 employers McKinsey did on employer and employee health insurance reactions related to federal health care reform. The report notes:
  • After 2014, 30% of employers will likely stop offering health insurance to their workers. They note that this is a higher percentage than what the CBO estimated.
  • Over 85% of employees will stay at their jobs even if their employer no longer provides health insurance coverage. Approximately 60% of these workers though, would expect the money no longer spent by the employer on health insurance to be used to boost employee pay.

[For a Reuters article on the report - click here.]

Will this affect health care reform? Can we truly have health care reform if health care is still so tied to employment? What about the modern worker who is a self-employed entrepreneur - what will their health insurance cost - I don't think they were considered in health care reform, yet, likely a growing employment trend.

The exclusion for employer-provided health care is one of the largest tax expenditures at $117 billion for 2011 (and higher beyond 2011 - JCT report page 47). And this is just the income tax cost, not the payroll tax cost. This tax expenditure survived health care reform intact, despite the inequities of it (this is a very large cost that could be modified so that the dollars are distributed more equitably among all individuals). Will it (should it) survive tax reform intact?

What do you think?

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