News Item

Obamacare’s tax on health insurers hitting small businesses instead

November 4th, 2015

What would have been a 4.5 percent increase in health insurance costs turned into a 9 percent increase this year for a Tempe, Ariz.-based signage company due to the Affordable Care Act’s tax on health insurers.

That’s just not fair, said Blue Media owner Jared Smith, who pointed out that larger competitors who self-insure don’t face the health insurance tax’s added cost.

“We’ve got to spread the burden a little bit bit,” Smith said.

To help pay for the ACA, Congress imposed a new tax on health insurance companies. Insurers, however, are passing on this tax to customers such as Blue Media in the form of higher premiums.

That’s what happens when you add a tax to a mandated product — customers end up paying it, said John McClelland, chief economist for the American Rental Association. McClelland’s trade association represents owners of equipment rental operations, some of whom he said can’t afford health insurance any more.

Smith and McCelland spoke at a briefing hosted Tuesday by the National Federation of Independent Business on efforts to lobby Congress to repeal or suspend the ACA’s health insurance tax. That tax is projected to raise around $150 billion over 10 years. That’s a lot of added costs for small businesses, but it’s also a lot of money for Congress to offset if the tax were repealed. That’s why repealing this part of Obamacare is an uphill battle for the Stop the HIT Coalition, which was formed in 2011 and includes 36 organizations representing millions of small business owners.

The coalition released a poll of 251 small business owners that found that 55 percent of them expect their health insurance premiums to increase as a result of ACA’s health insurance tax. Nearly 80 percent said these additional costs will force them to make changes to their business, such as layoffs or delayed hires, as well as cutbacks in insurance coverage.

“This new poll underscores that small business owners are not just deeply concerned about the financial strain the health insurance tax is causing, but also that fewer jobs, less health insurance coverage and delayed investments are likely the unintended consequences of this new tax on small businesses,” said Amanda Austin, NFIB’s vice president of public policy.

Getting rid of the health insurance tax is “going to be a long haul,” Austin concedes.

But there is precedent for changing parts of the Affordable Care Act that aren’t working. President Barack Obama, for example, recently signed legislation that repealed an Obamacare provision that would have moved businesses with 51-100 employees into the small group market next year. There’s also bipartisan support for repealing the so-called “Cadillac tax” on high-value health insurance plans, and for ending the ACA’s medical device tax.

The challenge for Congress on repealing any tax is how to come up with money to offset the revenue that would be lost. But NFIB hopes that stories from small business owners about jobs lost or jobs that were never created due to the health insurance tax will persuade members of Congress to find a way to repeal.

Nearly 60 percent of small business owners said they would be more likely to support a congressional candidate who supports repealing ACA taxes like the health insurance tax, NFIB’s poll found.