Health Insurance Tax Impacting Hiring

August 2, 2011

According to two recent reports, the  Health Insurance Tax (HIT) provision included in the Patient Protection and Affordable Care Act (PPACA) as a pay-for, is poised to impact two million small businesses beginning in 2014.

As previously reported, NSBA has been urging the repeal of the HIT, as it represents a similar, unfair burden as another recently-repealed provision of PPACA – the expanded 1099 reporting provision. The HIT would almost exclusively impact small businesses given it is a tax assessed on health insurance providers. Because the majority of large companies “self-insure,” meaning that the company itself serves as the insurance provider rather than going through a third-party provider such as Aetna or Blue Cross, the fees assessed to “fully-insured” insurance plans such as Aetna or Blue Cross will be passed along to their small firm and individual clients.

Lawmakers estimated the HIT would provide $87 billion to help pay for portions of PPACA, however even the Congressional Budget Office (CBO) report states the annual tax on health insurance companies “would ultimately raise insurance premiums” for individuals and families in the fully-insured market—essentially small businesses, their employees, and their families.

One recent study from the American Enterprise Institute (AEI) stated that the law, “…imposes numerous taxes and fees that are bound to increase the cost of coverage for employers who choose to retain it. … The PPACA imposes new taxes on health insurance providers [the HIT] … and other revenue raisers that will amount to approximately $400 billion over the next ten years.”

The other study from the Heritage Foundation found that, “Employers face considerable uncertainty about what constitutes qualifying health coverage and what it will cost,” and “businesses are not exaggerating when they tell pollsters that the new health care law is holding back hiring.”

Both reports underscore NSBA’s Mid-Year Economic Report findings on health insurance which shows that just six months ago, 24 percent of small businesses reported holding off on hiring whereas today, 32 percent—one in three—are not hiring directly due to increasing health care costs.

NSBA is supporting legislation (H.R. 1370S. 1049) to repeal the HIT.

Please take a few moments today to contact your lawmakers and urge them to support legislation to repeal the HIT.