SHRM Survey: Taxing Insurance Contributions Would Result in Higher Health Care Costs for Employees

Protections for pre-existing conditions cited as most valued aspect of ACA

June 13, 2017
ALEXANDRIA, Va. — A majority of respondents to a new Society for Human Resource Management (SHRM) survey anticipate that employees will pay more for health insurance if Congress decides to tax insurance contributions.

As the Trump administration and Congress negotiate elements of health care and tax reform, there likely could be changes to the tax treatment of employer-sponsored health benefits. Currently, premiums that employers pay for health insurance are exempt from federal and payroll taxes, and employee premiums are not considered taxable income.

Two-thirds (67 percent) of respondents to SHRM’s Health Care Reform Survey said employee health insurance premiums would increase, and 60 percent expected an increase in out-of-pocket health care costs if employer and employee insurance contributions were taxed. 

“A majority of HR professionals surveyed by SHRM indicated that if Congress changes the tax treatment of employer-sponsored health care, employees will see an increase in their costs,” said Evren Esen, SHRM’s director of workforce analytics. “That could have an adverse impact on the health care coverage offered by employers.”

As Congress acts to repeal and replace the Affordable Care Act (ACA), the survey also found that HR professionals consider prohibiting the exclusion of pre-existing conditions as the most important element of the law. Eighty-three percent of respondents said it was important that individuals with pre-existing conditions not be excluded from health coverage.

Respondents also cited preventive care coverage (52 percent), no lifetime limits (37 percent) and benefits for dependent children up to age 26 (37 percent) among the most important elements of the ACA.

Health care costs in 2017 increased for 79 percent of respondents. These employers reported an average 11 percent increase in costs.

Over one-half (55 percent) of responding organizations changed their health care coverage in 2017. Of those, 39 percent modified their existing health plans and 17 percent added new health plans. 

One element of the ACA being debated on Capitol Hill is the so-called Cadillac tax, an excise tax of 40 percent that would be imposed on high-value health benefits. The survey found that 26 percent of employers are awaiting final guidance before making any changes because of the upcoming tax. Eighteen percent of organizations plan to conduct an analysis of the impact of the tax. Fourteen percent of organizations already have acted to avoid paying the tax, and just 1 percent have decided to pay the tax.

Methodology: The survey polled 918 randomly selected HR professionals who work with benefits or compensation or who hold the title of manager or above. The survey conducted between Feb. 9 and 24, 2017, has a margin of error of plus or minus 3 percentage points.

Media: For more information or to schedule an interview, contact Kate Kennedy at 703-535-6260 and or Vanessa Hill at and 703-535-6072.

About the Society for Human Resource Management
The Society for Human Resource Management (SHRM) is the world’s largest HR professional society, representing 285,000 members in more than 165 countries. For nearly seven decades, the Society has been the leading provider of resources serving the needs of HR professionals and advancing the practice of human resource management. SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China, India and United Arab Emirates. Visit us at and follow us on Twitter and Instagram @SHRMPress.


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