The health care reform law includes at least 18 new tax increases, including the employer mandate (or “free-rider” penalty) and the health insurance tax, which will total approximately $835 billion over 10 years (2013-2022). The law makes a host of changes to the Internal Revenue Code beyond the “free-rider” penalty, individual mandate, and premium tax credits. The cumulative effect of these new taxes and fees is hindered economic growth and job creation.
This table highlights the revenue provisions of the law, the effective date, and the revenue impact.
What is the Health Insurance Tax?
The health insurance tax – imposed by Section 9010 of the Patient Protection and Affordable Care Act (PPACA) – is an annual fee on health insurers based on the net premiums written per year.
Because self-insured plans are exempt from this tax, it will primarily affect small businesses that purchase plans in the fully-insured market. This new yearly burden, which is expected to be $8 billion in 2014 and increasing annually to an estimated $14.3 billion in 2018, will be passed on to small business in the form of higher premiums.
What is the impact of the Health Insurance Tax?
As with many of the other excise taxes included in the PPACA, the health insurance tax will not only affect access to coverage, but it will affect jobs and our economy.
The Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO) have reported that this tax will be shifted to consumers (small and family-owned businesses and individuals – those who already have the hardest time affording coverage) in the form of higher premiums.
The cost of the health insurance tax is $101.7 billion in the first 10 years alone. This is money that could be spent paying employees higher wages, purchasing equipment, and hiring more employees – investments that would grow the economy and get more Americans back to work.
For additional information how the tax will impact employees and employers, please see the Chamber’s one-pager on the health insurance tax.
On March 7, 2013, the Senate Republican Policy Committee released a document summarizing the effect of the health insurance tax on consumers, business, and the economy confirming the detrimental effect of the tax on small business and the economy.
What can the business community do?
In February 2013, Representatives Charles Boustany of Louisiana and Jim Matheson of Utah introduced the “Jobs and Premium Protection Act," or H.R 763. This bipartisan legislation will amend the PPACA to repeal the health insurance tax. The U.S. Chamber of Commerce submitted a letter of support for this legislation.
If you would like to submit a letter urging your Representative or Senator to support legislation repealing the health insurance tax, you can do so by using the sample letter here.
Additionally, the U.S. Chamber of Commerce held a webinar on March 6, 2013, titled “What is the Health Insurance Tax? – A Tax on Coverage” which explained how this new tax on health insurance will inevitably burden employers, consumers and state and federal budgets.
In early March 2013, the IRS released the proposed rule implementing Section 9010 of the PPACA - the health insurance tax. The Chamber plans to submit comments on the proposed rule – comments are due on June 3, 2013.