The federal government understands how the rising costs in health care affect families. It has looked to find ways to help businesses and individuals make health insurance more affordable. Tax exclusions for Employer Sponsored Health Insurance, coupled with Section 125 plans, are two ways that the government has tried to help cut health care costs. Some businesses, however, may stop offering health insurance benefits between now and 2014, when the Affordable Care Act will take full effect.

The tax advantages that employers and employees receive with Employer Sponsored Health Insurance are considered a tax expenditure. This is because it deviates from tax rules. By excluding health care costs from income and payroll taxes, the federal government is losing revenue in order to encourage employers to offer health insurance.

Moreover, it has worked. Even though this tax break is estimated to cost the government over a trillion dollars between 2010 and 2015, over 60 percent of Americans that are under the age of 65 have health insurance through an employer. The changes that will occur in 2014, however, make some employers feel that they will save more money if they drop Employer Sponsored Health Insurance in the next few years.

Even with the tax exclusions, health insurance costs over $13,000 per employee, and by discontinuing health care benefits, companies may pay less overall, even if they have to pay fines to the federal government because they dropped coverage.

Many businesses are considering this option. Some will wait until 2014, while others are looking to discontinue health insurance before 2014. This means that many experts in the field are looking at 2012 as a deciding year for Employer Sponsored Health Care.

Opponents of the Affordable Care Act believe that this affirms their concerns about the program. One reason why businesses are looking at dropping health insurance is because individuals with have another option. However, if they drop the benefits package and don’t compensate by offering other incentives or increased wages, employees may not react well to the change.

Employees often look at the combination of benefits and salary when considering a position. They may even accept a lower wage if the benefit package is attractive. Without a decent salary or a benefit package, employees may no longer find their position as appealing.

The Affordable Care Act is a large overhaul of the healthcare system. As with any big change, many businesses are unsure of what the future holds and reacting to this uncertainty. Before making such an important decision, businesses should review the facts and consider their options carefully. They should also consult an expert in Employer Sponsored Health Insurance and Section 125 Premium Only Plans.