NU Online News Service, Dec. 18, 2003, 5:55 p.m. EST – The congressional Joint Economic Committee has issued a paper that blasts the current U.S. system of treating employer-paid health insurance as a tax-free benefit.[@@]

“The Health Benefit Tax Exclusion Distorts The Health Insurance Market,” according to the headline on the press release announcing the release of the study.

Exempting employer-paid health benefits from federal and state income taxes “helped foster rapid growth of employer-sponsored group health insurance in the United States, but it also created unintended consequences for the structure, cost and availability of both private health insurance and health care that continue today,” Tom Miller, a senior health economist at the committee, writes in the paper.

The current system hurts workers who would prefer to receive higher wages in return for bearing more of their health care costs, and it also hides the full cost of health care decisions from the covered workers, Miller writes.

Miller points out that the percentage of U.S. workers covered by employer-sponsored group plans fell to 61% in 2002, from an all-time high of about 70% in 1987.

Miller says Congress could “level the tax playing field” by reducing the current scope and scale of the tax exclusion for employers or by offering tax credits or full tax deductibility for individuals who buy their own coverage.

Congress also could set fixed caps on tax benefits for health spending, and it could do more to encourage the purchase of defined contribution health plans, Miller writes.

Sen. Robert Bennett, R-Utah, the chairman of the Joint Economic Committee, has issued a statement recommending that Congress act to shake up the current status quo.

“We must give greater consideration to alternatives to employer-paid group health plans and expand the use of consumer-driven health care options such as health savings accounts,” Bennett says in the statement.

Representatives for AAHP-HIAA, Washington, were not immediately available for comment.