Michael Thompson, an actuary and principal of global human resources for PricewaterhouseCoopers LLP’s health care practice in New York, believes that such a move would accelerate a trend toward voluntary benefits for years to come.
In essence, he says companies would be tempted to offer a non-taxable medical option as a core employer-subsidized benefit featuring multi-tiered rate structures and allow employees to buy additional coverage on their own nickel.
He also predicts that dental plans “might soon become more of an employee payoff benefit because otherwise you’re imputing income to people who otherwise might not want a dental plan.” The upshot is that any such development would force employers to rethink benefits and plan design strategies if the tax advantages of those benefits change materially, according to Thompson.
Ron Neyer, senior analyst of distribution for LIMRA International, believes “any health care reform scenario will undoubtedly leave some gaps exposed. And voluntary carriers are likely to move quickly to offer products which fill those gaps, where ever they ultimately surface.”
From both a macro and microeconomic point of view, any employer under this scenario would look to avoid additional costs, explains Eric Raymond, chief vision officer of Corporate Synergies, a benefits consulting and brokerage firm in Mt. Laurel, N.J. “As benefits get lower and not-eligible expenses increase, employees will be forced to figure out a way to insure those gaps, and voluntary benefits will dramatically increase because of it,” he says.
Published reports suggest that the idea of taxing employer-provided health insurance is losing ground, though still on the bargaining table. Sen. Kent Conrad (D.-N.D.) has noted that such a proposal appears to be unpopular with voters. Indeed, a recent Quinnipiac University poll of 3,063 people found that 63% of the respondents opposed a tax on employer-provided health benefits, while 55% favored limiting tax deductions for families earning more than $250,000 a year.
