As more pieces of the Affordable Care Act (ACA) went into effect in 2014, many employers faced higher health insurance premiums and, in some cases, fewer coverage options. One factor contributing to the increased cost of health insurance is the Health Insurance Tax (HIT), one of numerous new taxes authorized by the ACA. NRCA is working to get Congress to delay and ultimately repeal this burdensome tax.
Stop the HIT
Originally messaged by the Obama administration as a "fee" placed on insurers, the HIT is a tax passed on in the form of higher premiums for health insurance policies sold on the fully insured market, the source of coverage for most small and mid-sized businesses. According to the nonpartisan Congressional Budget Office, the HIT will collect $8 billion in revenue during 2014 then increase nearly 40 percent during 2015 to more than $11 billion and continue to increase in the years to come.
Self-funded health plans established by labor unions and large corporations are not affected by the tax, leaving the burden to fall almost solely on small businesses, the sector responsible for more than 90 percent of all new U.S. jobs, according to the Small Business Administration.
NRCA and other business groups are working through the Stop the HIT coalition to educate Congress and the public about the harmful effects of this tax.
Congress
The ultimate goal of the Stop the HIT coalition is to fully repeal the tax, and legislation to accomplish this goal enjoys majority support in the House of Representatives. However, repealing the HIT carries a significant budgetary implication because the revenue gained pays for new ACA subsidies. Legislation to repeal the tax, unless offset with spending cuts or other tax increases, substantially will increase the federal deficit.
Recognizing the deep budgetary implications of full repeal, Reps. Charles Boustany (R-La.) and Ami Bera (D-Calif.) introduced H.R. 3367, The Small Business and Family Relief Act, to ease the burden placed on small-business owners. This bipartisan bill will provide immediate relief from the HIT for two years while a permanent solution is developed. The bill includes instructions for the Department of Health and Human Services to issue a rule that would provide a rebate to any tax paid by consumers, possibly in the form of reduced premiums for the next year's insurance plan. Therefore, neither the government nor the insurance companies would keep any part of the tax.
This legislation is gaining support in the House with more than 90 co-sponsors, including more than 20 Democrats. Thanks to the strong grassroots activity on the part of NRCA and others in the coalition, members of Congress have heard from their constituents about the hefty premium increases they are receiving. Even lawmakers who supported the ACA from the beginning now see small-business owners and workers are paying the tax, not the insurance companies who were the original target.
Delaying or repealing the HIT is a much tougher challenge in the Senate. Given the firm control of the Senate by Democrats and opposition to repeal virtually any part of the ACA by President Obama, passage of legislation to repeal the HIT in the near future is unlikely.
Post-election shake-up
However, it is possible Congress will begin focusing on making significant modifications to individual components of the ACA after the 2014 midterm elections. If health insurance premiums for small businesses and individuals continue to significantly increase, there could be an appetite on Capitol Hill to provide immediate relief to small-business owners.
This month, lawmakers will be campaigning hard to keep their jobs. The ACA will be a major factor on voters' minds when they head to the polls in November.
Republicans are poised to maintain control of the House and have a good chance to obtain a majority in the Senate. If this were to happen, Republicans likely will include legislation to repeal or delay the HIT in ACA-related reforms as part of their agenda for early next year. However, if Democrats retain a majority in the Senate, we could see continued gridlock with little chance to pass even a delay of the HIT.
NRCA will continue working to increase support for legislation to delay or repeal the HIT on Capitol Hill to provide much-needed relief for small-business owners.
Andrew Felz is NRCA's manager of federal affairs.
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