When An Employer Drops Coverage, Workers Lose Their Tax Advantages

With just a year to go before the most significant changes under the Affordable Care Act take effect, readers have many questions about how the law will affect them.

Q. My employer, with over 3,000 employees, is holding meetings with us explaining the health-care law and how expensive it is going to be for us and for them. My employer is saying it will likely drop our insurance and make us buy our own. Will the insurance premiums still be a pre-tax payment? Are there affordable options for me and my family?

A. If your employer drops your health insurance coverage and you have to buy your own plan, you would no longer be able to pay your premium with pre-tax dollars. That tax "exclusion" -- your health insurance benefits are excluded from taxable income -- cost the federal government an estimated $240 billion in 2010, according to an analysis by the Urban Institute. Politicians on both sides of the aisle have suggested eliminating it, but Congress has not taken action on this.

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Source: Kaiser Health News