The recent letter “Subsidy fight” by Chris Boyd suggests Democrats may benefit politically if Republicans refuse to continue subsidies under the Affordable Care Act, because some people who buy insurance on the exchanges might be forced to drop their coverage. What the letter did not mention is that ACA subsidies are not the only subsidies in our health care system — they are simply the most visible.
People with employer-provided insurance already receive one of the largest federal tax subsidies in the tax code. Employer-paid health insurance is not taxed as income, meaning employees pay no payroll tax on it, and employers can deduct the premiums they pay as a business expense. This combination costs the federal government hundreds of billions of dollars every year. In other words, taxpayers already subsidize employer‑based coverage — the subsidy simply takes the form of tax breaks rather than direct payments.
ACA subsidies existed because people who buy insurance on the exchanges do not receive these employer tax benefits. Without some form of assistance, they pay far more for the same coverage simply because they are not getting insurance through a job. That is the imbalance at the heart of this debate.
Republicans can address this issue in a way that is fair to taxpayers by offering an alternative to the direct‑payment subsidy model favored by Democrats — namely, allowing ACA premiums to be tax‑deductible. Many taxpayers who object to direct subsidies would likely view this approach as far more reasonable, because it simply extends the same tax treatment that employer based insurance already enjoys.
And perhaps most importantly, this kind of tax deduction approach offers something our politicians rarely see anymore; a common sense solution that both parties could agree on. Instead of another “subsidy fight,” it would put employer-based and exchange-based insurance on equal footing and give taxpayers a fair, consistent way to support health coverage without turning it into yet another partisan battle.
