“Health insurers, in partnership with a small business advocacy group, have launched a campaign to repeal an industry tax included in the health reform law.
The Affordable Care Act subjects insurers to an excise tax set at $8 billion beginning in 2014, rising to $14.3 billion by 2018 and increasing thereafter based on the rate of premium growth. The charge is assessed industrywide, with each insurer paying a portion based on its net premiums, according to the Centers for Medicare & Medicaid Services. Similar fees are assessed on medical device manufacturers and pharmaceutical companies.
The tax, included to offset the cost of some health reforms, will raise the cost of insurance coverage for small businesses and individuals, according to America’s Health Insurance Plans, which has partnered with the National Federation of Independent Business. The organizations plan a research and advocacy campaign to win congressional support.
While efforts to reverse large portions of the reform law have fizzled in the current Congress, AHIP hopes to follow the path of a successful repeal of a little-liked tax reporting provision also crafted to raise revenue. In April, President Barack Obama signed legislation overturning a mandate that all businesses, nonprofits and governments file a 1099 form with the Internal Revenue Service to report any purchase of good or services of $600 or more.
“You have a tax in here that is going to make health insurance more expensive,” said L.D. Platt, AHIP’s executive director for strategic communications.
Currently, AHIP and the NFIB do not have a proposal to offset revenues to be raised in revenue by the excise tax. “Policymakers need to figure out how to deal with this,” Platt said.
The taxes will be passed along to health consumers as higher insurance premiums, CMS anticipated in an April 2010 report.
“We are going to do everything we can to make sure Congress stops this misguided tax that will make it even harder for job creators to offer health insurance to their employees,” Amanda Austin, the NFIB’s director of federal public policy, said in a statement.
Also taking effect in January 2014 will be an expansion of tax credits for small employers that provide insurance coverage for their workers. The credit will be up to 50% of the employer’s contribution. Under the Small Business Health Options Program, employers will be able to offer coverage from multiple insurers, as large employers and governments often do, but make a single payment. Among the areas of intended flexibility is in what role states provide for agents and brokers (Best’s News Service, Aug. 12, 2011).
The Affordable Care Act imposes a separate excise tax on so-called “Cadillac” plans. Currently, employer provided health care is excluded from income for tax purposes; a 40% excise tax on high-cost plans will debut in 2018 (Best’s News Service, Dec. 3, 2010). That tax affects premiums of more than $10,200 for individuals and $27,500 for families.