Credit: Allison Bell/Touchpoint Markets
The value of employer-sponsored health benefits amounted to about 9% of the household income of U.S. households in the middle fifth in terms of income in 2021, according to a new report from the Congressional Budget Office.
The value of the federal employee health benefits tax exclusion and other federal health benefits tax breaks amounted to about 2.5% of the 2021 income of the households in the middle fifth, the CBO analysts reported.
The ratios for benefits and tax break value to household income were about the same for households with income in the second-highest fifth and the second-lowest fifth in terms of income.
The ratios were much lower for the lowest-income households and the highest-income households: For them, the value of employee health benefits amounted to only about 5% of income, and the value of federal health insurance-related tax benefits amounted to only about 1% of income.
The ratios were low for high-income households because their income was so high, and the ratios were low for low-income households because they were less likely than other households to have employer-sponsored health benefits.
To make the calculations, the CBO analysts used figures for how much income households have after paying their taxes and after getting "transfers" from government programs such as Medicaid, Medicare and Social Security.
The CBO analysts prepared the report to show members of Congress and other policymakers how health insurance policy choices might affect households at different income levels.
"Because health insurance benefits provided by employers and by the federal government affect a household's full economic resources, CBO counts spending on those benefits as a form of non-cash income," a CBO team wrote in a summary of the analysts' findings.
What it means: Any steps Congress takes to change the current federal tax rules for employer-sponsored health benefits could have a much bigger effect on middle-income U.S. households than on other U.S. households.
Income "quintiles": The CBO analysts used income data from the Internal Revenue Service to determine how much households in each of the five income-level "quintiles," or fifths, earned in 2021.
Here's the average 2021 income level, after transfers and taxes, for households in each quintile:
Lowest quintile: $48,700.
Second quintile: $64,500.
Third quintile: $86,300.
Fourth quintile: $117,700.
Fifth quintile: $316,800.
The backdrop: The CBO posted the analysis of how employer-sponsored health benefits and other health insurance programs affect households' economic resources Tuesday, as members of Congress were trying to create a "minibus" legislation package that would fund the U.S. Labor Department and the U.S. Department of Health and Human Services.
A minibus package could simply fund federal agencies, but it could also carry other legislation through Congress.
Some are hoping a minibus could include an Affordable Care premium subsidy bill.
A minibus package could also include provisions such as new rules for pharmacy benefit managers, new rules for individual coverage health reimbursement arrangements, or changes in the tax rules for employer-sponsored health benefits.
At press time, reports of major efforts to change the current federal health benefits tax rules had not surfaced, but America's Health Insurance Plans, a group for health insurers, has been trying to ward off any changes by organizing a campaign to defend the current rules.
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