“Our goal in choosing the level and indexing for the cap was to select a policy that would make a significant contribution to debt reduction, but would be distributionally equitable,” the authors write.
Lisa Clemans-Cope, an Urban Institute senior research associate and one of the authors of the report, said that the cap would not have a major impact on those currently with employer-sponsored coverage, yet would make a huge different on deficit reduction. She added the report suggests a small limitation, and “we're not going to undermine the system … that (is) the largest source of health insurance” for people.
However, Christopher Ryan, vice president of ADP Strategic Advisory Services, sees problems tinkering with the pre-tax exclusion for health benefits, the “bedrock of employer-sponsored coverage as we know it today.”
Ryan, who advised Senate staffers during the crafting of the Patient Protection and Affordable Care Act, said the pre-tax exclusion broadly benefits the middle class and scaling it back could reduce the incentive for employers to sponsor coverage.
“Given that some businesses are struggling to abide by the ACA, stability (of the health insurance system) is critical and this (proposal) could dramatically change the landscape,” he said.
Although the institute's proposal is similar to others that have been floated in recent years, Caroline Pearson, a vice president at Washington-based consulting firm Avalere Health, said the current plan would face huge political obstacles.
“It's politically quite difficult because employer-sponsored insurance is really entrenched and protected” in this country, she says. “It disproportionately impacts both public-sector and unionized workers, so it's difficult for the Democrats to support. On the other hand, it's one of the only proposals that is in discussion that economists agree can reduce healthcare costs.”
Follow Jonathan Block on Twitter: @MHjblock