A health and labor coalition sent a letter to Congress this week, urging lawmakers to reevaluate how an excise tax on health benefits will affect dental and visions benefits. The group contends an excise tax will cause some employers to drop those benefits.  

The Patient Protection and Affordable Care Act, which was passed by the Senate on Christmas Eve, calls for a 40% excise tax on health plan costs that exceed $8,500 annually for single coverage and $23,000 annually for family coverage.

 “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," the letter asserts. “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.”

Members of the coalition, which includes the American Benefit Council, the American Dental Association and the National Association of Vision Plans, argue that the excise tax will drive many employers to reduce benefits “by eliminating limited service supplemental benefits and [flexible spending accounts] that fund much-needed and prevention-oriented dental and vision care in order to avoid the tax.” The coalition, which represents 14 trade groups, urges Congress to consider the following:

• Excluding FSAs, as well as managed and limited service dental, vision and stand-alone plans from the calculation of health plan costs;  
• Raising the threshold and indexing the threshold to medical inflation; and
• Replacing the single and family coverage thresholds with a per-covered-person threshold, a fairer approach to plan cost allocation.

“The health care reform debate has never centered on dental, vision and other supplemental benefits,” says 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,” he adds.

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