Coalition asks Congress to eliminate excise tax on health benefits

The American Dental Association (ADA), American Benefits Council, and Communications Workers of America, along with the Academy of General Dentistry, American College of Prosthodontists, American Academy of Pediatric Dentistry, American Association of Oral and Maxillofacial Surgeons, American Association of Orthodontists, Guardian Life Insurance of America, Hispanic Dental Association, Service Employees International Union, National Association of Vision Care Plans, and VSP Vision Care sent a letter yesterday asking Leaders of the House and Senate to eliminate or substantially modify the excise tax on health benefits, including flexible spending accounts (FSAs), to ensure the final health care reform legislation does not adversely impact key and important goals of health reform, like primary and prevention-oriented care.

American Dental Association President Ron Tankersley, DDS, says the provision as written, "[I]s the opposite of health care reform. It would compel many employers to drop critical dental and other coverage to avoid the tax.  It dismantles exactly the type of preventive, primary care that everyone agrees this country needs more of."

The letter states, "Many employer-sponsored plans exceed or will exceed the PPACA excise tax threshold simply because the plans include many older workers or retirees with higher cost health care needs, or are concentrated in locations with high health costs.  For example, the standard option BCBS Federal Employees Health Benefit plan, a basic plan that covers 3.8 million Americans today, will exceed the PPACA excise threshold in the first year of the tax (2013) for single coverage and in the third year of the tax (2016) for family coverage (CWA Report, 12/8/2009)."

The letter continues, "As a result, the excise tax could lead many employers to reduce benefits (Mercer Survey, 12/2/2009) by eliminating limited service supplemental benefits and FSAs that fund much needed and prevention-oriented dental and vision care in order to avoid the tax.  Cuts in these crucial benefits will lead to a decline in access to necessary care.  Patients rely on the preventive services covered by the dental, vision and limited service supplemental plans to prevent infections, slow the progress of chronic disease and facilitate early treatment of preventable conditions."

"The health care reform debate has never centered on dental, vision and other supplemental benefits," said James A. Klein, president of the American Benefits Council. "Those valuable benefits have only been included in the calculation of the excise tax to raise revenue.  Several modifications are needed to improve the excise tax provision, including not applying the tax to these important supplemental benefits."

According to Louise Novotny, Research Director at Communications Workers of America, "For millions of patients and consumers, most of whom are middle and low income working Americans, the excise tax is unfair and punitive, leading to reduced health care services."

Without Congressional consensus to replace the excise tax on health benefits with another fair and broad funding source, there are solutions that can mitigate the severe harm the excise tax poses to patient care.  These include:

1) Excluding FSAs, as well as managed and limited service dental, vision and stand-alone plans from the calculation of health plan costs;

2) Raising the threshold AND indexing the threshold to medical inflation;

3) Replacing the single and family coverage thresholds with a per-covered-person threshold, a fairer approach to plan cost allocation. [1]

SOURCE American Dental Association