Health Insurance Tax a Major HIT to Families & Small Businesses
May 1, 2013
Columns & Op-eds
In today’s economy when people are looking for paycheck security, the federal government should not be putting additional burdens on American employers and families. The numerous requirements of the Affordable Care Act (ObamaCare) are now the biggest concern for small businesses, according to a recent survey by the US Chamber of Commerce. In these uncertain financial times, we are relying on our small businesses – our nation’s best job creators – to bring life back to our still anemic economy. Instead of helping them create jobs for American families, Washington is now asking small businesses to shoulder more mandates, more regulations, and more taxes.
The massive healthcare law includes the health insurance tax (HIT), which is driving up the cost for small businesses to provide health insurance for their employees. That is why as Chairman of the Small Business Subcommittee on Health & Technology, I recently held a hearing on this important matter
The annual fee on health insurance was included as a way for the Administration to finance the healthcare law. Supporters of the legislation contend that the tax will be paid by the health insurance companies, a way to hold them accountable for soaring profits and earnings. You and I both know that will never happen.
This assessment is not a partisan attack; it is common sense, substantiated by independent studies. Both the Joint Committee on Taxation and the Congressional Budget Office, among others, have said they expect a very large portion of this tax to be passed through to the purchasers of insurance in the form of higher premiums. This will drive up the cost of insurance for seniors relying on Medicare Advantage, families all across the economic spectrum, and small businesses in all sectors.
The HIT begins in 2014 with an estimated price tag of $8 billion. The number increases to $14.3 billion in 2018 and continues to increase from there. The nonpartisan Joint Committee on Taxation estimates the fee will exceed $100 billion over the next ten years.
A March 2013 study released by the National Federation of Independent Business Research Foundation estimates the fee will raise the cost of employer-sponsored insurance by two to three percent in 2014, imposing a cost of nearly $5,000 per family by 2020. The study also predicts that price increases caused by the fee will reduce private sector employment by up to 262,000 jobs by 2020, with the majority of losses falling in the small business sector.
Instead of forcing job losses, Washington should repeal the HIT to stop a tax increases on American families. The Joint Committee on Taxation has said the HIT is essentially an excise tax based on the sales price of health insurance – so it will not be tax deductible. The Joint Committee estimates that eliminating the fee could reduce the average family premium in 2016 by $350 to $400.
The HIT widely misses the mark when it comes to supporting American small business and providing security for American families. It needs to be repealed.