The HIT

1.7 million small businesses will soon have to face their biggest concern in today’s market: skyrocketing health insurance expenses.

Through Obamacare or the Patient Protection and Affordable Care Act (PPACA), the new Health Insurance Tax (HIT) taxes health insurance companies $68 billion in assessments between 2014 and 2019. To bear the burden of the HIT health insurance companies are forced to raise premiums.

What They’re Saying: Experts and Analysts Agree

Experts, advocates and analysts agree: a health insurance tax will drive up business expenses and hurt the bottom-line budgets of small-business owners and the self-employed:

 
 
The obvious reality is that the companies would pass these higher tax levies onto their customers (i.e., those purchasing health insurance) in the form of higher premiums. If Congress raised the federal gas tax, the price of gas at the pump would jump. If Congress imposes a special levy on health insurance companies, the price of insurance jumps. It is that simple.
J.D. Foster, Ph.D.
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For the small business community, controlling the increasing costs of health insurance premiums has been the top concern for decades. This new tax will be almost entirely passed from insurers to small businesses and their employees, raising health care costs and increasing economic uncertainty for this vital sector of our economy.
Dan Danner
President and CEO of the National Federation of Independent Businesses
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The only… place to shift the tax cost is onto customers – i.e., families and small businesses… The health insurance fee will likely quickly and nearly completely be incorporated into higher insurance premiums. The premium tax alone means that American families will pay as much as $135 billion more in insurance premiums over the next 10 years.
Douglas Holtz-Eakin
Former Director of CBO
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We expect a very large portion of the insurance industry fee to be passed forward to purchasers of insurance in the form of higher premiums… We estimate that the premiums would be between 2.0 to 2.5 percent greater than they otherwise would be… Eliminating this fee could decrease the average family premium in 2016 by $350 to $400.
Thomas Barthold
Chief of Staff of the Joint Committee on Taxation
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Instead, what we have heard repeatedly are the voices of job creators who have said that they will not create jobs because the health care law is financed through destructive job-killing policies including: New taxes on small business health insurance plans.
NFIB
Letter to Congress
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The Senate bill’s health insurance excise tax is terrible public policy. Although the insurance companies would technically make the tax payment, they would undoubtedly pass this cost along to employers purchasing the plans for their workers in the form of higher premiums.
The Heritage Foundation
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The legislation would impose several new fees on firms in the health sector. New fees would be imposed on providers of health insurance … those fees would be largely passed through to consumers in the form of higher premiums for private coverage. Self-insured plans would be mostly exempt from the fee on health insurance providers, and since large firms are more likely to self-insure, that fee would result in smaller percentage increases in average premiums for large firms than it would for small firms and for nongroup coverage.
Senator Evan Bayh
CBO Letter on House bill – HR 3962
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The health reform legislation, as enacted, imposes collective annual fees …on health insurance plans... We anticipate that these fees and the excise tax would generally be passed through to health consumers in the form of higher drug and device prices and higher insurance premiums, with an associated increase in overall national health expenditures ranging from $2.1 billion in 2011 to $18.2 billion in 2018 and $17.8 billion in 2019.
CMS Actuary Memo
Estimated Financial effects of the “Patient Protection and Affordable Care Act,” as Amended
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Employers already struggling to keep their doors open now must choose between higher health care costs or costly penalties. To suggest this doesn’t undermine job creation is to deny reality.
John Kline (R-MN)
Education and Workforce Committee Chairman
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It will hit 50 million Americans every year. The ripple effects will very likely increase premiums by billions of dollars a year for families and small businesses across the country...That tax will be particularly hard on the poor and middle class — the very people that were supposed to benefit from the law.
Representative Marsha Blackburn (TN-7)
VIce chairwoman, Subcommittee on Commerce, Manufacturing and Trade of the House Energy and Commerce Committee
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For the last 40 years, I’ve worked in the health and life insurance industries in Indiana, helping small businesses find the best benefit package to suit their needs. Because of this daily interaction, I am very well versed in the Affordable Care Act and the HIT, and I’m very concerned about how they will affect Indiana’s 484,000 small businesses.Every time I talk with a small business owner, I make sure to mention the HIT and ask them if they know how it is going to affect them. For those that don’t, I work with them to plan for how to absorb the extra costs. The worst part about this tax is that many people who will feel the impact of the HIT, aren’t even aware of it yet.
David Berman
NeaceLukens
Location: Indianapolis, Indiana
As the owner of East-Harding Construction, I’ve always made a personal commitment to take care of my 35 full-time employees. That includes providing high-quality health benefits and coverage.  But rising health insurance premiums are making that more and more difficult for me. Over just the last five years, premiums have increased by about 10 percent per year. If the HIT takes effect, my estimates are that premiums will increase by an additional five percent per year.  As a result, it will be a challenge for me to continue providing the same level of coverage for my employees.  We need to repeal the HIT in order to give thousands of small companies like mine an unencumbered chance to survive in this lean and ultra-competitive economy.  To do so, we must keep our overhead as low as possible while still providing our trusted and well-qualified employees with meaningful health care benefits so that they can care for their families.  If the HIT is not repealed, I fear that small business like mine – which are the backbone of our economy and our tax base – will suffer and some will not survive.  This is not good economic policy.
Van Tilbury
East-Harding Construction
Location: Little Rock, Arkansas
Twenty years ago, my dad, brother and I started Illuminating Technologies, an industrial, commercial and retail lighting firm. While we have grown over the years, we are still a small business with a big footprint. Unfortunately, I cannot accurately predict the costs of operating our business over the next three to five because of the still-unwritten and yet-to-be-implemented aspects of the President’s healthcare law and their impact on insurance costs. This is true of our own company as well as our suppliers, partners and clients. There is a lot of uncertainty in the small business community, which leads to lost opportunities for growth. Without predictable costs we are unable to bid on multi-year contracts that we need to expand our business, hire more people and support growing clients.  We have 34 employees, and the HIT will certainly affect how much we are able to contribute toward health insurance pensions for each of them.  
Gordon Hunt
Illuminating Technologies
Location: Greensboro, North Carolina
I own a fire and safety equipment company in Louisiana that employs more than 20 people. We do everything we can to keep our health insurance premiums down. Every year we meet with our employees to discuss health care costs and encourage them to take advantage of the preventative services offered through their plans to help them live healthier lives and stay out of the emergency room whenever possible. Our employees understand how their behavior impacts premiums and everyone is doing their part to keep costs down.Despite that, our premiums increased more than six percent last year, and I’ve been advised that they could go up between 22 to 25 percent next year. This increase is largely due to the Health Insurance Tax. If that happens, we may no longer be able to afford to cover 100 percent of our employees’ premiums. We may have to move to an 80/20 cost sharing arrangement, which I would hate to do. I am proud of the benefits we provide, but implementation of the HIT may leave us with no other choice.
Gerald Faulk
C & S Safety Systems of Louisiana
Location: New Iberia, Louisiana
Ten years ago, my husband and I started a tour bus company as a hobby. We were both employed as journalists and never thought Little Rock Tours and Travel would become a full time job for one of us, let alone other employees. But we found a niche and grew. Our part time hobby became a thriving tour company that employs 47 full-time equivalent employees. Business was good, and we were able to offer fair wages and good health insurance coverage for our employees. But ever since the health care reform law passed, providing health insurance benefits for our employees has gotten more and more difficult. Costs have skyrocketed and in one year alone we faced a 42 percent rate increase. With the HIT set to take effect next year and raise prices further, we may be forced to change insurance plans to one with higher deductibles. From a personal perspective, that would put our employees in a tough spot when it comes to much-needed medications and medical procedures. From a business perspective, the HIT may cause my husband and me to stop hiring new people and slow our growth. Not only would repealing the HIT help bring some sanity back to health insurance costs, it would help stimulate the economy with new jobs, too.
Gina Martin
Little Rock Tours and Travel
Location: Little Rock, Ark.
As the president of a small, but growing, law practice, it is important to me to keep costs under control. Since we opened our doors in 2009, we have represented professionals from around Denver and earned a reputation as one of the area’s top litigation firms. Because of that reputation, in just five years we’ve carefully grown from a brand new firm to a small business with 15 employees. The truth is, with the amount of new business coming in, I probably have the capacity to add more employees. Unfortunately, the HIT and, more generally, rising health care costs make doing so a risky proposition. The HIT alone will increase health care costs by $7,500 per year, simply to continue providing the same insurance coverage. That is on top of annual premium increases. I know I’m not the only small business owner sitting on the sidelines and not hiring new staff because of rising health insurance costs. Repealing the HIT will help the economy by freeing small businesses to hire more people and grow at a faster rate.
Paul Faraci
Faraci Wolanske, L.L.C.
Location: Denver, Colo.
For the last 31 years, I have owned a full-line independent insurance agency that serves families and local businesses in Oregon. I provide my employees with a set amount of money to put toward insurance and let them choose the policy that best serves their needs. With the HIT set to raise health insurance costs for individual health insurance policies, the money I provide is not going to go nearly as far as it once did. I would like to ensure my employees are not adversely affected by the HIT, but I just do not think it will be possible. Unfortunately, I don’t have any additional cuts I can make to accommodate another increase in health care costs. I have already been forced to lay off 20% of my workforce in addition to minimizing overhead costs as much as possible. Like many small business owners, my company’s income depends on the rates we receive from the insurance companies we contract with. Despite these variable costs, we need to maintain competitive wages to attract and retain valuable employees. The HIT is yet another cost that will weigh on the shoulders of small business owners and their employees. Elected leaders – both in Oregon and around the country – need to find a way to change things before it is too late and help small businesses like mine avoid the HIT.
Kelsey Wood
Gordon Wood Insurance and Financial Services
Location: Roseburg, Ore.
I own ProComm Alaska, a two-way radio communications company based in Anchorage and Fairbanks. Our small business provides a critical service to Alaskans by ensuring that Alaska’s emergency response capabilities and infrastructure are fully functioning. We have 20 employees. And our company has installed 28 of the 32 dispatch centers in the state. As a result, I believe in taking care of our hard-working employees, which is why for the past 15 years, I have provided my staff with full health insurance coverage. Unfortunately, the HIT has left us with no choice but to decrease our benefits. Initial estimates indicate that the HIT will cost my small business an additional $100,000 in higher premium costs over the next 10 years. My small business already operates on a tight budget, and absorbing such an increase in health care costs is unrealistic—plain and simple. We need relief from the HIT so that small businesses like mine may continue to focus on the critical services we provide, instead of being forced to make up for financial burdens that impact the livelihood of our employees.
Linda Peters
ProComm Alaska
Location: Anchorage, Alaska

In Your State…
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