Capitol Hill

Stop the HIT Building support for repeal of the health insurance tax

The Patient Protection and Affordable Care Act (PPACA), enacted by Congress in 2010 as President Obama's signature legislative achievement, remains highly controversial and has significant implications for employers, including roofing contractors, as well as the U.S. economy. As such, NRCA continues working on PPACA-related issues in the regulatory and legislative arenas.

One area of focus is developing support within Congress for legislation to repeal the new health insurance tax (HIT) created by PPACA. This tax is one of the law's more egregious provisions from the perspective of small and mid-sized businesses and one of the many reasons NRCA strongly opposed PPACA before its enactment.

The opposite result

Beginning in 2014, the HIT will be levied on premiums paid to health insurance companies operating in the group and individual insurance markets based on the companies' market shares. But health insurance companies won't pay the tax; instead, the tax will be passed on to the customers of health insurance companies—small businesses and self-employed individuals who purchase fully insured health care plans. The tax will not affect large corporations that self-fund health care benefits for their employees because they don't purchase coverage in fully insured markets.

According to the nonpartisan Congressional Budget Office (CBO), the HIT is estimated to raise $87 billion during its first 10 years and balloon to a staggering $208 billion during the following decade. CBO confirms the HIT "would be largely passed through to consumers in the form of higher premiums for private coverage." Former CBO director Douglas Holtz-Eakin estimates the tax could amount to as much as a 3 percent increase, or nearly $5,000, in premiums for a family of four during a 10-year period. The HIT is estimated by private studies to increase premiums for roughly 2 million small businesses and about 26 million employees who receive health care benefits provided by their employers.

The HIT is one tax among more than $500 billion in new taxes included in the PPACA for the purpose of helping to off-set the estimated $1 trillion cost of the law. However, there is no guarantee these new taxes will be enough to pay for the true cost of the benefits the law creates.

It's clear small businesses and the self-employed already have huge problems affording health care benefits, and it's hard to see how a tax that ultimately is borne by this market segment can do anything but further drive up insurance premiums. The HIT will raise the cost of health insurance—the exact opposite of what the PPACA's supporters promised small businesses.

Because the tax isn't scheduled to take effect until 2014, it largely has flown under the radar within Congress and the media. However, legislation to repeal the tax has been introduced in the House (H.R. 1370) and Senate (S. 1049) and already has obtained some bipartisan support. NRCA is working as part of the "Stop the HIT" coalition to lay the foundation and build support for eventual repeal of the tax on small businesses and self-employed entrepreneurs.

Given how hard this tax would hit small businesses, there is speculation that repeal of the HIT could become the "next 1099" issue as the effective date approaches in 2014. This refers to another PPACA tax provision—an expansion of IRS Form 1099—that was repealed by Congress earlier this year with broad bipartisan support almost exactly one year after the PPACA's enactment.

Stay tuned

Although it's unlikely legislation to repeal the HIT will pass the current Congress, it could become a major issue along with other controversial components of the PPACA in 2013. This is especially true if Republicans gain a majority in the Senate and a Republican wins the White House as a result of the 2012 elections.

NRCA will continue working to develop bipartisan support to repeal this tax on small businesses.

Duane L. Muuser is NRCA's vice president of government relations.


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