In 2010, the Affordable Care Act was enacted by Congress, and the legislation has had significant implications for employers that offer health care benefits to employees. NRCA continues its regulatory and legislative efforts related to this nearly decade-old health care law.
Health Insurance Tax
Repeal of the Health Insurance Tax is one of NRCA’s objectives. The HIT was one of several taxes included in the ACA intended to help offset the estimated $1 trillion the health care law costs taxpayers.
The HIT is levied on health insurance premiums paid to insurance companies operating in the group and individual insurance markets based on their share of the market. But insurance companies pay the tax only in a nominal sense. Ultimately, the tax is passed on to small businesses and their employees and self-employed entrepreneurs who purchase fully insured health care plans. Employers that self-fund health care benefits for their employees (primarily large corporations) are not affected because they don’t purchase coverage in fully insured markets.
In 2011, the nonpartisan Congressional Budget Office confirmed the tax “would be largely passed through to consumers in the form of higher premiums for private coverage.” According to a 2017 study conducted by global management consulting firm Oliver Wyman, the HIT is estimated to raise $260 billion during 2020-29. This means, on average, a health care premium for a family of four will increase at least $5,000 over 10 years. In 2020, the HIT will add an estimated $16 billion to the cost of health care coverage for individuals, small businesses, families and Medicare Advantage seniors.
In 2011, NRCA joined other business groups participating in a “Stop the HIT” coalition to lay the foundation for eventual repeal of the tax. The HIT was collected in 2014, 2015 and 2016, but the coalition experienced success when Congress delayed the tax for 2017 and voted to suspend the tax for 2019. Unfortunately, absent any further action by Congress, the HIT is slated to return in 2020 and beyond.
Earlier this year, Reps. Ami Bera (D-Calif.), Josh Gottheimer (D-N.J.), Kenny Marchant (R-Texas) and Jackie Walorski (R-Ind.) introduced the Health Insurance Tax Relief Act of 2019 (H.R. 1398) in the House of Representatives. The bipartisan legislation would suspend the HIT for two additional years. A similar bill (S. 172) was introduced in the Senate by Sens. John Barrasso (R-Wyo.), Cory Gardner (R-Colo.), Doug Jones (D-Ala.), Tim Scott (R-S.C.), Jeanne Shaheen (D-N.H.) and Kyrsten Sinema (D-Ariz.). NRCA and other coalition organizations are now working to expand support for the legislation in Congress and have sent a letter of support to Capitol Hill.
In addition, Reps. Anthony Brindisi (D-N.Y.) and Marchant recently introduced the Jobs and Premium Protection Act (H.R. 2447) in the House. The legislation would permanently repeal the HIT and currently is under committee review.
NRCA will continue working to develop bipartisan support for legislation to delay or fully repeal the burdensome tax.
The Cadillac Tax, a tax on high-cost health care plans, is another tax authorized by the ACA that could affect employers if it is not delayed or repealed.
Under this tax, employer-sponsored health benefit plans that have values exceeding specified thresholds will be subject to a 40% excise tax starting in 2022. Although the tax will be levied on insurance companies, it will almost certainly be passed on to employers and employees. In 2022, the thresholds are projected to be $11,200 for single coverage and $30,150 for family coverage and will be indexed for inflation thereafter. The Cadillac Tax was scheduled to take effect in 2018, but Congress has postponed its implementation twice because of bipartisan opposition to the tax.
In July, the House overwhelmingly passed the Middle Class Health Benefits Tax Repeal Act of 2019 (H.R. 748), legislation intended to repeal the Cadillac Tax. It remains uncertain whether Senate leadership will take the legislation under consideration.
NRCA will continue advocating for relief from taxes that add to the high cost of health insurance. However, the outlook for full repeal or even further delay of either tax remains uncertain given the federal government’s budgetary situation. Before the taxes can be repealed or delayed, the projected lost revenue must be offset by alternative taxes or spending cuts or added to the growing federal debt. With deficits approaching $1 trillion annually for the foreseeable future, it is unclear how Congress will approach this issue despite strong bipartisan support for repeal of these health care taxes.
This column is part of Rules + Regs. Click here to read additional stories from this section.