May 11, 2017 - Health

The largest health care subsidy: employer coverage

Sen. Orrin Hatch controversially said this week that repealing the Affordable Care Act subsidies and Medicaid expansion is difficult because once you get people "on the dole, they'll take every dime they can."

Reality check: Nearly every American benefits from subsidized health insurance, not just those who gained coverage under the ACA. The largest health care subsidy is the same one that Hatch and millions of others take advantage of: the tax break for employer-based coverage.

Data: Department of the Treasury; Chart: Andrew Witherspoon / Axios
Data: Department of the Treasury; Chart: Andrew Witherspoon / Axios

Employer health insurance premiums are exempt from income and payroll taxes, costing the federal government $359 billion in lost tax revenue this year, according to the Treasury Department. That figure is expected to rise to almost $600 billion by 2026.

The ACA attempts to alter job-based health benefits through the so-called Cadillac tax — to the delight of health economists as well as many Republicans and Democrats who want to put a limit on high-cost health plans. But taxing employer-based coverage has proven to be politically unpopular with companies, unions and workers, and House Republicans abandoned plans to limit the tax break in the health care bill the House just passed.

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