When it was signed into law, Obamacare contained over a trillion dollars in new or higher taxes on the American people over a decade. The health insurance tax (HIT), a tax on insurance premiums, is one of Obamacare’s costliest taxes. If lawmakers fail to repeal or delay the tax, it will harm more than 141 million consumers, including those in the individual market, large and small group plans, Medicare Advantage and Medicare Part D plans.
The Health Insurance Tax is set to again go into effect in 2020 imposing a $16 billion tax on premiums next year alone.
Congress must prevent this, ideally through outright repeal as proposed in a bipartisan Senate bill (S. 80). Short of full repeal, Congress should continue to delay the HIT so that it doesn’t harm health care consumers, as proposed in another bipartisan bill (S. 172), which would delay the HIT for two years.
The HIT Harms the Middle Class, Small Businesses, and the Elderly
The HIT is designed to pass the costs onto the middle class, seniors, and the poor. The HIT is estimated to negatively impact the 11 million households that purchase through the individual insurance market and 23 million households covered through their jobs. In 2020 alone, the HIT is projected to add an estimated $16 billion to the cost of coverage for families and Medicare Advantage seniors.
If lawmakers fail to act, the HIT will increase premiums by 2.2 percent per year and by almost $6,000 over the next decade for a typical family of four with small or large group insurance. This tax is also highly regressive – half of the HIT is paid by those earning less than $50,000 a year.
The HIT Is A Job Killer
The HIT is job killer that targets small businesses at the exclusion of large corporations and unions. Because the tax only applies to fully-insured plans, large corporations and unions (which are universally self-insured) emerge unscathed. According to the American Action Forum, the will directly impact 1.7 million small businesses.
Typically, small businesses purchase insurance through the small group insurance market, while larger employers have the scale to provide healthcare through self-insured plans, which are excluded from this tax.
Because it falls disproportionately on small businesses, the health insurance tax suppresses economic growth and jobs.
Small businesses account for half of all jobs in the US and two-thirds of new jobs in recent decades so this tax will mean businesses across the country can spend less investing in new equipment, hiring new workers, or providing higher wages.
One estimate, conducted by the National Federation for Independent Businesses estimates the tax could cost up between 146,000 and 262,000 jobs over a decade.
Time for Lawmakers to Take Action
There are two bipartisan Senate bills that will stop the HIT from hitting the American people. The first is S. 172, the “Health Insurance Tax Relief Act,” introduced by Senators Cory Gardner (R-Colo.), Jeanne Shaheen (D-N.H.), John Barrasso (R-Wyo.), Doug Jones (D-Ala.), Tim Scott (R-S.C.), and Kyrsten Sinema (D-Ariz.). This legislation suspends the costly HIT for 2020 and 2021, saving taxpayers an average of $1,000 over the next two years.
Click here to read ATR’s letter of support for S. 172.
The second bipartisan bill dealing with the HIT is S. 80, the “Jobs and Premium Protection Act,” introduced by Senators John Barrasso (R-WY), Cory Gardner (R-CO), and Kyrsten Sinema (D-Ariz.). This legislation fully repeals the HIT.
Click here to read ATR’s letter of support for S. 80.
In a time of divided government, repeal of the health insurance tax is a proposal that has bipartisan support. 77 of registered voters support delay or full repeal of the HIT, according to polling released by Morning Consult.
Congress should follow the will of the American people and immediately delay or repeal the HIT. Doing so will give much needed certainty and relief to small businesses, seniors, and families.