Job-based health coverage gives taxpayers a positive ROI, American Benefits Council says
According to the council, U.S. companies spend more than $5 on health benefits for every $1 of tax revenue lost.
Employer-provided health care coverage provides a healthy return on investment for U.S. taxpayers, according to the American Benefits Council.
“It is no surprise that public polls reveal the popularity of job-based health coverage, because we all know it is the high-quality, affordable coverage that people want to keep,” said James A. Klein, president of the council. “Less well known is that employer-provided health coverage is an enormous bargain for American taxpayers. A simple calculation shows that U.S. companies spend more than $5 on health benefits for every $1 of tax revenue lost.”
Related: Employer-sponsored health insurance is a great form of profit-sharing
The council cited two sources for its numbers. There was $153 billion in “forgone revenue” in 2019, because workers do not pay income tax on their employer-provided health coverage, according to the Joint Committee on Taxation. Put another way, in a system without a tax exemption for employer-sponsored health insurance, the federal government might have received an additional $152.5 billion in tax revenue that year. Also in 2019, employers spent $814 billion to provide health coverage, based on Bureau of Economic Analysis figures.
“A back-of-the-envelope calculation reveals that each dollar of federal expenditure yielded approximately $5.34 in benefits for covered employees and their families,” Klein said. These statistics are important for three reasons, he said.
“First, those policymakers who advocate scrapping employer-sponsored health coverage should be aware that it would cost enormously more to provide the same level of financial security for health care needs exclusively directly through government programs than it does to incentivize tax-favored employer-sponsored coverage.”
“Second, any discussion of a public option should include an understanding of the highly efficient private system. Well-intended proposals to provide coverage options must not disturb the innovative and effective employer system.”
“Third, and most urgently and optimistically, there are many practical reforms policymakers can pursue right now that would lower costs and improve quality across the board. This includes cost and quality transparency measures, eliminating anticompetitive practices and enhancing health savings accounts.”
Employers largely agree that the nation’s current health care spending trajectory is unsustainable, a recent Kaiser Family Foundation survey showed. A range of solutions appealed to employers, including implementing a public option, of which 47% of employer respondents approved. Individual states’ efforts have indicated that it is possible for the government to take on a greater role in administering health care without supplanting cost-effective employer-sponsored health plans.
“Americans highly value employer-provided health coverage, but they and lawmakers may not fully understand its economic value,” Klein concluded. “Public policy should build on the employer-sponsored system so more people can share in that value.”
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