Small Businesses, Lawmakers Push to Repeal 'Killer' Health Insurance Tax

By: Kenric Ward | Posted: April 26, 2012 3:55 AM
Small Businesses and HIT

Credit: Stefano Lunardi - Reflekta - Shutterstock

A federal Health Insurance Tax scheduled to kick in by 2014 will cost small businesses $87 billion and "kill jobs," the National Federation of Independent Business says.

In Congress, an effort to repeal the tax is gaining bipartisan steam.

The "HIT" will have "irreversible consequences" on the national economy, according to the NFIB Research Foundation, which predicted the loss of nearly 250,000 U.S. jobs and $30 billion in sales by 2021 due to the tax.

"Ostensibly a tax on insurers, [HIT's] real effect will be hundreds of billions of dollars of taxation on people who purchase coverage in the fully insured market -- mostly small-business employers, employees and the self-employed," said Robert Graboyes, senior health-care adviser for NFIB.

"These are the people who usually generate around two-thirds of America’s new jobs."

Legislation aimed at repealing the HIT is attracting support on Capitol Hill -- even from a few Democrats.

Sens. John Barrasso, R-Wyo., Orrin Hatch, R-Utah, and Olympia Snowe, R-Maine, introduced “The Jobs and Premium Protection Act” in the Senate.

Reps. Charles Boustany, R-La., and Dan Boren, D-Okla., introduced companion House legislation that has more than 125 bipartisan co-sponsors.

Six Florida Republicans are among the co-sponsors: Reps. Jeff Miller, R-Pensacola; Bill Posey, R-Rockledge; Dennis Ross, R-Lakeland; Steve Southerland, R-Tallahassee; Cliff Stearns, R-Ocala; and Allen West, R-Plantation.

Meantime, a Stop The HIT Coalition, which includes more than 35 national organizations representing millions of small-business owners, is working to repeal the Health Insurance Tax.  

A study by the management consulting firm of Oliver Wyman found that small businesses have the largest financial exposure.

For single coverage, Wyman projected that small employers will have to pony up $2,400 to $3,100 more per employee. Family coverage costs for small employers will increase between $6,000 and $7,700, Wyman said.

Costs for private family premiums will actually go up more than for small business, with increases ranging between $6,200 and $8,000.

By contrast, the HIT bypasses employers who have coverage through self-insured plans -- mostly labor unions and governments.

"Like [Obamacare's] essential health benefits and longstanding state benefit mandates, the HIT puts an anchor around the neck of small business while leaving larger organizations free to swim unburdened," Graboyes said.

The latest estimates peg HIT's initial added employer costs at $14.3 billion -- roughly 15 percent of the total small-business expenditures on employee benefits in 2007.

Big corporations won’t escape unscathed. Large employers will see single-coverage costs rise between $2,300 and $2,900 over a decade.

The Obama administration says some of HIT's costs will be offset by a new credit aimed at helping small businesses and small tax-exempt organizations cover low- and moderate-income workers.

"The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have," the administration said.

"In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees."

But a report by the Joint Congressional Committee on Taxation estimated that the take-home pay of the average small-business employee would be reduced by $500 a year, thanks to HIT.

Small businesses say the yet-to-be-felt financial burdens imposed by Obamacare are retarding economic recovery.

“On the heels of Tax Day when Americans take pause to remember their financial obligations, small businesses are reminded that they cannot afford another tax on their operations," NFIB said in a statement.

"If Washington truly wants to turn the economy around, they must start by repealing unnecessary, costly burdens, like the HIT, that prevent small business growth.”

Amanda Austin, NFIB's director of federal public policy, said, “After a disappointing unemployment report of only 120,000 jobs added last month, we need to remove the obstacles that further prohibit our nation’s small businesses from contributing to the economy and job market.

"The Health Insurance Tax will debilitate small businesses at a time when our nation needs them most.”

Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.

Comments (8)

1:44AM APR 27TH 2012
Doesn't the defined contribution solution already exist? A quick search finds

10:10PM APR 26TH 2012
Has the National Federation calculated the cost to the US taxpayer for all of the uninsured that end up with serious & long term illnesses? This country has to come to grips with universal health care. The reality is we save money if we spend it on preventative care. Mr. Lloyd, you have been a very lucky man not to have insurance and have a healthy family. Even for many with health insurance and a million dollar life time max on the policy will end up in bankruptcy with a catastrophic illness. Is that the American way?
Robert Lloyd
7:59AM APR 26TH 2012
Insurance is a cancer in our society. It takes responsibility away from the irresponsible party and the fun begins.
1:46PM APR 26TH 2012
If you truly believed that, you wouldn't have EVER had any insurance in your life. However, since undoubtably you have had and even paid for that insurance, and probably do so right now, just stamp that ole' HYPOCRITE ink directly on your forehead. We understand that some members of the far right can't help themselves.
Robert Lloyd
5:30PM APR 26TH 2012
>>If you truly believed that, you wouldn't have EVER had any insurance in your life.<<

I have never had any insurance I was not required by law to have... with one exception: a friend sold me some life insurance and he really needed the sale at the time. I'm that kind of guy.

And please refrain from name calling or you can leave the site and name call somewhere else.
10:10AM APR 27TH 2012
It appears that you started the name calling when you called people who get sick and cannot pay "irresponsible". And like the "America, love it or leave it crowd", anyone who disagrees with you is dismissed. Gee you have a lot of power. At least in your mind.
Robert Lloyd
8:21AM APR 29TH 2012
>>It appears that you started the name calling when you called people who get sick and cannot pay "irresponsible"<<

Personal attacks should not be tolerated. To talk of the news is what this site is all about.
11:50PM APR 29TH 2012
Perhaps you should remember that, but then I guess you probably couldn't make any comments at all without resorting to bigotry, racism or name-calling.

Notice how increasingly you're being called on it, and not just by me. Must be annoying.

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