BECKLEY – HIT is an acronym for Health Insurance Tax, a little known caveat in the new federal health care reform package, and some Beckley-area business leaders see this as an added burden that could cost small firms more than they can afford to pay.
A panel of them met Wednesday in the office of the Beckley-Raleigh County Chamber of Commerce to hear the organization’s chairman, Chris Hall, explain the details at a special roundtable discussion.
Hall pointed out that 96 percent of all businesses in West Virginia are considered small, employing a combined 592,000 out of a total workforce of some 700,000.
“When you impose a tax like this, it’s more difficult for those employers to absorb the costs, and it makes them make tough decisions,” said Hall, who also serves on Beckley City Council.
“Do they give pay increases to employees? Will they continue to offer health insurance?”
Hall told the business executives that HIT will cost the average employer about $500 per worker. Across the nation, that translates into $8 billion in the initial year of 2014, and by 2018, the tax will amount to a projected $14.3 billion, based on existing premiums.
Depending on one’s perspective, Hall said, many elements in the bill known in Congress and the national media as “Obamacare” are worthwhile, such as mandated coverage of pre-existing conditions, and coverage of children through the age of 26.
Some states have joined in a federal lawsuit to stop it, known formally as the Patient Protection and Affordable Care Act.
But when it comes to HIT, a coalition urging its removal sees it as bad.
“What it amounts to is a hidden tax on small businesses,” Hall said.
Some may view this as a means of targeting large insurance companies, but Hall suggested this is a naive way of looking at HIT.
“Companies won’t pay the cost,” he said. “It will just trickle down to the consumer in the form of higher premiums.”
Hall did the math for the benefit of the seminar’s attendees.
If a small firm has 10 employees, it gets hit with an extra $5,000 a year, and over a decade, that amounts to $50,000, he said.
“It penalizes the employers that are wanting to do the right thing and provide health insurance to their employees,” the Chamber chairman said.
“It’s unfair to charge you more to help provide coverage. And you look at the tough economy we’re in right now. Certainly, any additional costs are going to be tough for businesses to absorb.”
By way of definition, the federal Small Business Administration considers a small firm as one with 500 or fewer employees. In West Virginia, however, Hall said, the reality is that the bulk have 50 or fewer.
Hall emphasized the coalition isn’t advocating one way or another as to the health care act itself, but merely wants the West Virginia delegation in Congress to do what it can to remove Section 90-10, or HIT.
Frances Hemstreet, representing Moore Insurance Service, said many groups with whom she is working, those with 10 or fewer employees, simply cannot afford the tax, and if it becomes law, will have to cancel group coverage.
“If you can’t afford the health insurance, and you can’t afford to give employees a raise to help them to get insurance, what are they supposed to do?” she asked.
“We’re stuck. People call me every day and say, ‘When is this free health care going into place?’ I don’t know what part of free you don’t understand.”
Hall found Hemstreet’s callers a telling experience, saying, “People are going to be surprised when the health care law is finally in place. There is still a cost involved.”
In the past, Hemstreet said, rate increases ran from 20 to 30 percent, but of late, just the opposite has occurred, with 3 percent decreases the rule of thumb.
“I think it’s because they (carriers) know what’s coming,” she said.
Hemstreet predicted another likely change – employers limiting coverage to their workers only, dropping their family members. Only a week ago, she said, one big firm cut its payments to dependents from 50 to 30 percent. Another sent word only hours before the gathering it was “leaning” toward covering no dependents whatsoever.
Before long, she said, insurance will not be offered at all to a worker’s family.
“That would be scary,” said Roy Shrewsbury, owner of ESI WV, a firm that specializes in engineering and surveying.
Hall said another maneuver has been to encourage a move to self-insured programs which he views as “more risky.”
“However it turns out, it’s going to be expensive,” Shrewsbury said.
“It’s going to be bad for small businesses.”
Others joining in the seminar were Autumn Bess of AAA Insurance; Katie Smith and Elaine Butler, representing Glade Springs Resort; Doris Selko of Songer Insurance; and Richard Triggs, also of ESI WV. Rachel Coffman represented the Coalition to Stop the HIT.
“It’s a huge impact for small businesses,” Hall told reporters before the meeting.
“Over a period of time, that makes a real difference in what they’re able to do to support their families and their employees.”