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First Tuesday Forum: Is There a Fair Way to Cap the Tax Exclusion of Employer-Sponsored Health Insurance?

Katharine Graham Conference Center, Urban Institute
2100 M St. NW, Washington, DC
Tuesday, June 2, 2009

Listen to the event Audio Recording

To attend in Washington, D.C., RSVP at,
e-mail, or call (202) 261-5709. To listen to the audio webcast, register at

Health reform, the "let’s do lunch" of public policy, is on everyone’s lips in Washington. But -- often the big question after long-postponed, obligatory meals -- who is going to pick up the check? Capping the tax exclusion of employer-sponsored insurance (ESI), an idea loved and loathed by politicians from both parties, is on the table to pay for subsidies for the uninsured and to moderate companies’ incentives to offer high-end coverage. If a cap is defined by ESI costs, the generosity of coverage will not be the only determinant of whether benefits are taxed as income. Because of geographic differences in health care costs, cross some state lines and premiums for the identical benefits package can more than double. Workers' age, company size, and category of dependent coverage can also change premiums, even if benefits remain fixed. Can these inequities be avoided? If so, will this be a way to bridge the philosophical divide and move forward on comprehensive health reform? In a forthcoming paper, "Capping the Tax Exclusion of Employer-Sponsored Health Insurance: Is Equity Feasible?" the Urban Institute's Stan Dorn explores one way of initiating a cap fairly: taxing benefits if their actuarial value -- the claims cost that actuaries project if a nationally representative population were enrolled -- exceeds specified levels, thus making other factors irrelevant.

Be part of the conversation as a panel of experts considers

  • whether a tax cap using actuarial value can help bring peace to the health reform debate;
  • how actuarial value figures in the Children’s Health Insurance Program and Medicare Part D’s prescription drug coverage;
  • whether an actuarial value cap would impose unsustainable red tape on businesses or permit unscrupulous employers to "game" the system; and, above all,
  • whether capping the employer exclusion is a good or dangerous idea.


  • Leonard Burman, institute fellow and director, Tax Policy Center, Urban Institute
  • Stuart Butler, vice president, domestic and economic policy studies, Heritage Foundation
  • Stan Dorn, senior research associate, Health Policy Center, Urban Institute
  • Rich Ostuw, consulting actuary; former chair, American Academy of Actuaries task force on health plan valuation
  • Others to be announced