Download Locations

• Open CRS (User submitted)

Summary

It is estimated that nearly 170 million individuals have employer-based health coverage. As part of a comprehensive health care reform effort, there has been support (including from the Obama Administration) in enacting comprehensive health insurance reform that retains the employer-based system. This report presents selected legal considerations inherent in amending two of the primary federal laws governing employer-sponsored health care: the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC). ERISA may be a key part of the health reform discussion in two main ways. The first way is if Congress desires to amend the employer-based system, for example, to require financing or benefits for group health plans as provided by employers. If a national proposal were to require employers to provide or contribute to the payment of health benefits or to provide specific benefits as part of group health plans, ERISA could be a vehicle for this type of proposal. Second, if Congress were to amend the role of states in regulating employment-based health benefits, ERISAs express preemption provision, 514, would likely be implicated. Section 514 of ERISA is commonly seen as a barrier for states in enacting health reform that affects the employer-based system. This report provides an overview of ERISA preemption and analyzes some of the current issues dealing with the extent to which ERISA can preempt state health reform efforts, as well as issues that may be considered in a national health reform effort. While the current tax treatment of employer-provided health insurance is not technically an obstacle to health reform, various health reform proposals have included amendments to these tax provisions. The value of employer-provided health insurance is generally not subject to income or payroll taxes. This effectively results in the subsidization of employer-provided health insurance by the federal government. Some have argued that this subsidization is partly responsible for increasing costs of health insurance, as it gives participants an inaccurate sense of the true cost of their health care and leads to increased utilization of health care resources. Therefore, some have proposed reducing or eliminating this exclusion in order to provide individuals with a more accurate economic picture of their health care choices, while simultaneously raising federal revenue to pay for other aspects of health care reform. This report discusses the legal framework underlying the current tax treatment of employer-provided health care.

XML