NSBA Urges HIT Tax Relief

December 4, 2018

NSBA—along with its Stop the HIT coalition partners—recently send a letter to House and Senate leadership applauding their previous bipartisan efforts to suspend the Health Insurance Tax (HIT) for calendar years 2017 and 2019, and urging Congress to act before the end of the year to continue this relief to 2020. The letter calls for Congress to take immediate action to delay the HIT by including a provision in an end-of-year tax package.

The recently introduced—and pulled for lack of necessary votes—the Retirement, Savings, and Other Tax Relief Act of 2018 (H.R. 88)—that would extend temporary tax provisions that expired last year or are set to lapse at the end of this year, make technical corrections to a handful of provisions in the massive tax cut legislation that was signed into law in 2017, provide targeted relief to taxpayers affected by a recent series of U.S. natural disasters, create new retirement savings incentives, and revamp Internal Revenue Service operations, did not include any health care proposals, thus excluded any suspension or repeal of the HIT.

The HIT is one of the largest small-business tax increases included in the Patient Protection and Affordable Care Act (ACA) signed into law in 2010. The tax has increased in cost each year of its implementation. Originally referred to as a fee on insurers, the HIT is actually a tax passed onto consumers in the fully insured marketplace, where nearly all small businesses and the self-employed purchase their health coverage, in the form of higher premiums.

Actuaries assert that in 2020 alone, the HIT will increase the cost of coverage for millions of Americans by imposing more than $16 billion in additional premiums for their health insurance. Specifically, according to a report by Oliver Wyman, hardworking families are expected to pay an additional $480 in 2020 as a result of this tax. In total, the amount assessed and collected from the HIT is projected to be over $260 billion over the ten-year period of 2020 to 2029. The HIT will impact 1.7 million small businesses, 111 million employees and the self-employed who purchase health insurance in the individual market and 23 million employees who are covered by their employer.

Extending relief by suspending the tax for 2020 would help protect the nation’s 29 million small businesses, their employees, and the self-employed from greater instability, uncertainty, and higher costs. By continuing the HIT suspension, Congress would build on the continued promise to prioritize reforms that deliver affordable healthcare for American families. Legislation to repeal or suspend the HIT has been introduced on a bipartisan, bicameral basis since 2013 in both the House and Senate. Further, since 2015 Congress passed multiple suspensions of the HIT for benefit years 2017 and 2019.

Last week, a bipartisan group of Senators sent a letter to Senate Majority Leader Mitch McConnell (R-Ky.) and Minority Leader Chuck Schumer (D-N.Y.) urging action to extend the HIT moratorium. In the letter, Senators John Barrasso (R-Wyo.), Cory Gardner (R-Colo.), Doug Jones (D-Ala.) and Jeanne Shaheen (D-N.H.) wrote:

“Unless Congress acts, insurance carriers will include re-imposition of the tax for 2020 as they begin the process of setting rates early next year. Absent further congressional action, the tax will result in higher health insurance premiums throughout the insurance markets.”

Congress has provided relief from this burdensome tax twice and should do so again before the end of the year and before the tax returns in 2020. NSBA argues that suspending the tax is a critically important step to protect consumers, and Congress should focus on providing further relief in 2018 and beyond, otherwise, cost of this tax will begin to be factored into insurance premiums for individuals and small employers who enroll or renew in health insurance annual coverage.  That is, unless the HIT is repealed.