Employer Health Care Tax: Future of the Exclusion
Employers, prepare for a whirlwind of changes! The 2025 health policy landscape is transforming, and your employer-sponsored health plans face significant shifts driven by legislative action, regulatory updates, and crucial court decisions. A key takeaway is potential alterations to the tax treatment of employer-sponsored health care, wich could directly impact your bottom line. While some measures are currently omitted, they might resurface, so remain vigilant. This uncertain environment demands proactive steps.Learn about potential impacts on employee benefits and stay abreast of the latest developments in mental health parity and ERISA to stay ahead. News Directory 3 is committed to keeping you informed. Discover what’s next regarding these evolving policies.
Health Policy 2025: Employers Face Legislative, Regulatory Shifts
Updated June 13, 2025
Employers in 2025 are grappling with a shifting health policy landscape, as federal and state actions impact employer-sponsored health plans.Kerri Willis, senior counsel for Health Policy at the American Benefits Council, addressed the Greater Philadelphia Business Coalition on Health (GPBCH) annual Conference, outlining key legislative and regulatory developments.
Willis noted that tight margins in Congress and staff reductions in federal agencies are shaping policy initiatives. A Republican White House and Congress are prioritizing reconciliation bills to enact their agenda, potentially impacting the tax treatment of employer-sponsored health care.
According to Willis,changes to the tax exclusion for employer-sponsored health care could surface in reconciliation bills to offset spending. While the House version omits such changes,the Senate might include them,requiring employers to remain vigilant about potential impacts on employer-sponsored health plans.
Willis cautioned that limiting the tax exclusion could have widespread repercussions. An American Benefits Council study found that such a move could lead to 75,000 fewer jobs, a $10 billion annual reduction in GDP, and a $75 billion decrease in after-tax compensation for employees. The health policy shift could also increase the number of uninsured and raise mortality rates.
The House bill does codify individual coverage Health Reimbursement arrangement (HRA) rules and eases Health Savings Account (HSA) contributions for those covered under Medicare Part A,a spouse’s Flexible Spending Account (FSA),or direct primary care arrangements. These changes offer some versatility in employee benefits.
Willis also discussed the impact of new agency personnel and staff reductions on regulatory enforcement and guidance. The Trump administration has issued executive orders on price openness, fertility benefits, and prescription drug coverage, but their implementation details are still pending.
The administration’s directive on price transparency aims to mandate disclosure of actual prices, standardize data, and ensure compliance, providing employers with meaningful data to manage costs, Willis saeid. Discussions are underway to simplify the process for employers to offer fertility benefits, potentially exempting them from certain Affordable Care act (ACA) requirements.
A key advancement is the trump administration’s response to litigation concerning the Biden administration’s non-quantitative treatment limit (NQTL) regulations for mental health parity. The administration has requested a suspension of the litigation and halted enforcement of specific 2025 and 2026 requirements, signaling a reevaluation of these complex rules.
“I want to underscore that it doesn’t mean you don’t have to comply with any of the mental health parity requirements,” she said. “There are still regulations that came out in 2013 around financial and quantitative treatment limits…And there’s also still the comparative analysis requirement that was in the statute.”
ongoing issues with the No Surprises Act, particularly the arbitration process, and critical Employee Retirement Income Security Act (ERISA) preemption cases also demand attention. The supreme court is considering whether to review a 10th Circuit decision regarding an Oklahoma law restricting pharmacy benefit managers (PBMs), with the Trump administration opposing the review.
“I think it’s really about helping [legislators] understand how an erosion of ERISA preemption is going to impact costs for employers, impact costs for employees,” Willis explained.
recent court cases affecting the ACA’s preventive care requirements and employer mandate enforcement, along with increasing plan fiduciary litigation, further complicate the landscape. Willis urged employers to review their fiduciary processes for vendor selection and prescription drug benefit oversight.
“This is a really big deal for employers, and so if you haven’t had the chance to take a look around about your fiduciary processes when it comes to your health and welfare plans, I would really encourage you to do that.”
What’s next
The health policy environment for employers remains dynamic. Employers must stay informed, advocate effectively, and proactively review internal processes to navigate these complexities and ensure comprehensive, affordable health benefits.