Basics

Overview

Employer-sponsored health insurance (ESI) is a cornerstone of the U.S. healthcare system, providing coverage to approximately 60% of non-elderly Americans. A significant factor contributing to the prevalence of ESI is the current tax exclusion for employer-provided health benefits, commonly referred to as “employer exclusion.” This policy allows employer contributions toward employee health insurance premiums to be excluded from employees’ taxable income, resulting in substantial tax savings for both parties. Understanding the mechanics, utilization, and implications of employer exclusion is essential for comprehending its role in the U.S. healthcare landscape.

In this Basic, we examine employer exclusion as a workplace benefit, its role in tax policy, financial trade-offs, and the potential effects of its altering or elimination.