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“An obvious, important goal of the Affordable Care Act is to expand public and private health insurance options through the use of open insur- ance exchanges. ”

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Insurance Exchanges: A Potential Trap for the Unwary Employee

To the Editor:
An obvious, important goal of the Affordable Care Act is to expand public and private health insurance options through the use of open insur- ance exchanges. Insurance exchanges can provide competitively priced healthcare plans for Ameri- cans with limited employer-provided insurance op- tions. Yet, while exchange plans can be more cost- effective than employer-provided plans, they do not necessarily offer all of the tax benefits associated with employer-provided plans or plans purchased by self-employed individuals. (See section 106(a).) The resulting lack of tax parity, as described below, may undermine the competitiveness of exchange plans and, indeed, the very goals of the ACA. To bolster exchange use, a legal or regulatory change is necessary to ensure that exchange premiums are fully deductible, or alternatively, that taxpayers have the option to pay exchange plan premiums through a tax-efficient ‘‘cafeteria plan’’ or similar structure.