March 11, 2025

Since assuming office in January, the Trump administration has issued a historic number of executive orders and proposals that could eventually affect group health plan design and administration. While executive orders do not make any immediate changes to existing law, they may direct certain federal agencies to issue new regulations and guidance in the near future and could also serve as a blueprint for future legislative and regulatory priorities.

Among the proposals currently being considered is the taxation of certain employer-sponsored health plans. Under existing tax law, employer-paid premiums for group health plans are exempt from federal income and payroll taxes. The potential impact of taxing employer-sponsored insurance could be far-reaching. For example, applicable large employers may face increased pressure to reduce costs to offset lost tax savings and consider offering alternative forms of coverage (such as ICHRAs) to satisfy affordability requirements under the ACA. Some small employers that voluntarily offer coverage may choose not to do so any longer.

While the administration may be considering repealing the tax exclusion, a number of industry associations have started advocating to make the current tax exemption permanent. The Council of Insurance Agents and Brokers (CIAB) and the American Benefits Council (ABC) have also commissioned a study to demonstrate the full implications of taxing group health insurance.

Future administration proposals may also include rolling back marketplace premium subsidies enacted under the Biden administration, implementing work requirements for Medicaid, or scaling back the ACA’s expansion of Medicaid. Any cuts to Medicaid may ultimately result in increased enrollment in employer-sponsored health plans as individuals losing Medicaid seek alternative coverage. However, these proposals have not been formally announced by the Trump administration, and employers should not take any immediate action until further details are released.

Employer Takeaway

As noted above, the proposals governing taxation of employer-sponsored insurance, Medicaid, and the ACA Marketplace have not been officially announced by the Trump administration, so there is no need for employers to take any immediate action until further details are released. However, employers should be sure to carefully monitor regulatory and legislative developments that may impact the administration of group health plans, as changes are anticipated in the coming months.