The health care reform debate has shifted from the theoretical to the practical as the public plan option takes a backseat to financing concerns, says EBA health care panelist and American Benefits Council President Jim Klein.

While Klein feels taxing health care benefits was once a “foregone conclusion,” he believes a May 12 Senate Finance Committee hearing on the topic has left room for compromise. “We hope that lawmakers now see the holes in that proposal,” he says. “In that sense, the debate is moving forward…there is still plenty of time for compromise and to reach a sensible solution.”

Sens. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa) proposed several possible solutions for financing reform in a policy paper May 18 that include the option to tax employee benefits. The tax-free status of employer-provided insurance “encourages employers to offer ‘Cadillac plans,’ or overly generous health care plans that promote the overuse of health care services and drive up health care costs,” explain the Senate Finance Committee leaders in a joint statement.

The lawmakers’ proposals to change the tax structure include capping the exclusion based on the value of the health insurance policy, income level of the employee, or both. Another option is to convert the employer tax exclusion to an individual tax deduction or credit. But that’s not the way to save health care costs, says Klein.

“The place to find savings in health care is within the existing system, by improving quality and affordability. Eliminating or capping the employee tax exclusion should be a last resort option, not something to be included at this time,” he says. “As we said in our testimony to the Senate Finance Committee, disturbing this tax exclusion would destabilize employer-sponsored health coverage and the benefits that workers value very highly.”

Diane Boyle, AHIA EVP, is apprehensive about Baucus and Grassley’s overall coverage proposals, particularly the “questionable” role of the agent in the event of a health insurance exchange where the Department of Health and Human Services could potentially take over regulation of marketing activities, customer support and establish rate schedules for broker commissions. “There are a number of issues that cause immediate concern,” she says.

Still, there is room for optimism that legislation introduced by the Finance Committee will ultimately favor employer interests. The addition of Tom Reeder as Baucus’ benefits tax attorney is significant, says Bill Sweetnam, principal with Groom Law Group.

Currently benefits tax council at the Treasury Department, “Tom knows a lot about benefits and his addition to the staff will help make sure that whatever health care legislation is crafted that it will be done with someone who knows a lot about the topic being in the room,” says Sweetnam. “That makes for more workable legislation,” he adds.

Other good news for employers includes a White House meeting between President Barack Obama and business leaders May 12 on the topic of saving costs in health care reform. “The CEO meeting at the White House with America’s corporations was terrific — employers finally got a word in,” says Cyndy Nayer, president and CEO of the Center for Health Value Innovation.

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