Current federal income tax rules could give employer-sponsored health plans $6.6 trillion in subsidies over the 10-year period from 2027 through 2036, and $7.1 trillion in subsidies over the period from 2026 through 2036, according to a new report posted by the Congressional Budget Office.
Budget analysts last prepared a comparable report in 2023.
The new 10-year, 2027-2036 employer health tax subsidy total is 25% higher than the 2024-2033 total published three years ago. The new 11-year, 2026-2036 total is 26% higher than the previous 11-year total.
Both the 2023 report and the 2026 report include employer subsidy value estimates for 2026.
See also: Change or repeal employer-sponsored health benefits tax exclusion, analysts say
The estimated value of the employer health tax exclusion in 2026 is $471 billion. The one-year subsidy value estimate for 2026 is 4.4% higher than the one-year subsidy value estimate for 2026 published in the 2023 report.
The analysts: The CBO is a research office that helps members of Congress analyze the federal budget and bills that could affect the budget.
CBO analysts prepared the report together with analysts from another congressional research office, the staff of the congressional Joint Committee on Taxation.
The growth factors: The list of forces pushing up the value of the employer health tax exclusion subsidy includes increases in healthcare service prices, increases in enrollees’ use of care and modest increases in employer plan enrollment, the analysts said.
What it means: The size of the CBO/JCT tax subsidy value analysis could affect efforts by members of Congress to change the tax rules for health savings accounts, long-term care insurance and other health-related products.
The analysis could also affect efforts by employers and the benefits industry to protect the current federal employer health benefits tax rules.
Congress made a short-lived effort to limit the scope of the exclusion by including a “Cadillac plan tax” on high-value health benefit arrangements in the Affordable Care Act. The tax was rarely implemented and eventually was repealed.
Traditionally, many members of Congress have opposed efforts to reduce the employer health tax exclusion, but think tank analysts and members of Congress occasionally suggest using exclusion caps to reduce the federal budget deficit or pay for new programs or new tax incentives.
The tax expenditures value gap: Budget analysts note that the method they use to calculate the total value of the employer health tax subsidies is different from the method that analysts at the U.S. Treasury Department and the Office of Management and Budget use to calculate “tax expenditures” tables each year.
The tax expenditure tables show how a tax rule affects the federal budget deficit.
The tax expenditure tables included in the latest federal budget proposals estimate that the tax expenditure for the employer health exclusion in 2026 is $296 billion.
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