A coalition of benefits brokers, employer groups and benefits groups organized by Neil Trautwein is trying to ward off any efforts to weaken the current federal income tax exclusion for employer-sponsored health benefits.
The coalition, the Partnership for Employer-Sponsored Coverage, or P4ESC, has written to the leaders of the House and the Senate to oppose moves to cap the exclusion to increase federal tax revenue and help narrow the federal budget deficit or offset the cost of other federal tax cuts or federal program funding increases.
The P4ESC coalition fears that “no matter how carefully crafted a cap on the tax exclusion may be, there is no logical limiting principle to a cap,” according to the letter. “Future Congresses could well return to the tax exclusion to generate additional savings.”
A tax exclusion cap would be certain to hit employers and workers in some parts of the country more than others, and the pain would be worse for older workers, sicker workers and employers with older, sicker employees, the coalition predicts.
“Employees are already shouldering substantial tax burdens,” the coalition writes. “Taxing their health insurance as income would further burden employees, effectively amounting to a new and unappreciated tax hike.”
The players: Neil Trautwein, the lobbyist who organized the P4ESC coalition, is one of the most visible health policy players in Washington.
He started out by working as a legislative assistant to Senate Mitch McConnell, the Kentucky Republican who now serves as the Senate majority leader, from 1985 through 1991.
Trautwein later was a lobbyist at the National Association of Health Underwriters, the organization that became NABIP, and he then moved on to top health policy posts at the U.S. Chamber of Commerce, the National Association of Manufacturers and the National Retail Federation. He started his own health policy firm in 2020.
The P4ESC coalition is a group that represents benefits professional, industry groups and, in some cases, patient advocacy groups.
The core coalition membership lists ncludes the Associated Buildings and Contractors, the Council of Insurance Agents & Brokers, the ERISA Industry Committee, the HR Policy Association, the National Association of Benefits and Insurance Professionals, the National Retail Federation and Warner Pacific.
The policy backdrop: Congressional leaders have not been talking openly about capping the health benefits tax exclusion, but budget analysts at the U.S. Treasury Department and the White House Office of Management Budget point to the size of the group health tax exclusion every year.
When the White House releases proposed federal government budgets in the spring, OMB also posts a list of “tax expenditures,” or tax rules that reduce federal tax revenue.
In 2023, for example, the federal government lost $1.9 trillion on $5 trillion in revenue. The health benefits tax exclusion cost the federal government $231 billion.
Some analysts, including analysts at the Paragon Health Institute, a think tank with strong ties to Donald Trump, have suggested that capping the exclusion may be a way to improve government finances while reducing health care providers’, payers’ and employers’ incentive to let health care spending soar.
But the Paragon analysts emphasized that they believe any caps on the exclusion should be part of a comprehensive tax rule and health system change package, not a stand-alone item at the top of policymakers’ agenda.
The P4ESC coalition contends that health care costs are rising so fast mainly because health care providers make it harder for patients and others to understand how much they are charging and why, not because of the health benefits tax exclusion.