Health insurers warn that premiums are about to take a ‘HIT’

Health insurance premium tax is certain to be passed along to the consumer
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Protests are rising as the business community acquaints itself with a funding mechanism required by the Patient Protection and Affordable Care Act (PPACA).
One targeted protest is against a PPACA revenue stream, called the health insurance tax (HIT). Leading the charge in an organization called the Stop the HIT Coalition, which bills itself as a broad-based group representing the nation’s small business owners.
The HIT is scheduled to go into effect in 2014. According to the coalition, HIT will impose more than $100 billion in new taxes on the small business community, their employees and the self-employed over the following 10 years.
To support their contentions, the coalition cites a study released by the National Federation of Independent Business (NFIB) Research Foundation that forecasts total employment in Pennsylvania will decline by 2,591 to 4,601 jobs by 2022 as a direct result of HIT. Moreover, says the report, the state’s GDP will be reduced by at least $1.4 billion over a 10-year time span.
“Businesses in Pennsylvania already face significant regulatory and economic barriers to growth. Adding a tax that will cost the state jobs and revenue when we need to focus on rebuilding our economy is simply the wrong approach,” says Amanda Austin, NFIB director of federal public policy. “Instead we should foster growth by protecting small businesses and their employees from this destructive tax.”
In particular, the coalition points to the findings of former director of the Congressional Budget Office, Douglas Holtz-Eakin. He estimates that over a 10-year span the HIT will add $5,000 to premiums on insurance policies purchased in the fully-insured market.
This forecast is especially troubling for the small business community. Approximately 88 percent of small business organizations purchase health insurance in this fully-insured market.

Opposing certain components

Austin explains that issues with the PPACA passage have become the No. 1 concern of the business community. She says NFIB has focused on some of the act’s most damaging components to oppose. She adds that the NFIB has not offered a counter proposal to PPACA, but instead opposes segments of the legislation particularly injurious to business.
“The business community agrees that we didn’t want the PPACA in the first place,” says Austin. “Now, we face the HIT and we’re asking why we are the ones who must pay?”
The HIT is in reality a pass-through tax — meaning that even though insurance companies pay the tax, they will pass it on to their customers. According to Austin, this “sales tax” will create the third largest new revenue source in the PPACA, starting at about $500 per insured employee per year while creating no return benefit for the business.
“We believe that, into the future, the $500 cost can only go up,” says Austin. “President Obama will want to see this go through.” Austin concedes that it is going to be difficult to make changes to PPACA. However, as a representative of the business community, she says that her organization “cannot in good conscience allow the HIT and its associated mandates to unfold without subjecting the process to criticism and debate.”
Elizabeth Stelle, policy analyst for the Commonwealth Foundation, agrees that HIT’s onset in 2014 will be injurious to business. “We are hoping for small repeals of some of the sections in PPACA, such as the HIT,” explains Stelle.

Dissenting business voice

Not all of the voices associated with business are condemning the HIT. Tim Kearney, Ph.D., the conservative chairman of the business department at Misericordia University, says that his views regarding business taxes are evolving.
Dr. Kearney agrees with his fellow conservatives that the American tax code is overgrown at all levels, and that reform is badly needed across the board. He emphasizes that the overall economy behaves better when the specifics of regulations and the fiscal rules of the road are known, and PPACA has been a source of uncertainty ever since its passage in 2010.
However, Dr. Kearney explains that, even as recently as six months ago, the economy was in much worse shape than its current condition. Then, he would have vigorously opposed any PPACA taxes. Now, with the economy somewhat improved and the rules of the road “set” by President Obama’s re-election, a period of stability has begun. Congressional repeal of the PPACA has failed and there is no foreseeable way for conservatives to end the program. “This makes the future and what we will be dealing a lot clearer than it was before the election,” says Dr. Kearney. “The rules of the road are now established, and business will adjust to them.”
He adds that many businesses all across the country now have quite a bit of cash on their balance sheets. This is a positive development and represents a big change from pre-2008 operating procedures. As yet, however, businesses have not signaled a willingness to spend that cash. In sum, he says, “Business adjustments to these new economic situations and taxes will probably come in ways we can’t predict.”

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