What is the “Premium Tax”?
Beginning in 2014, the Affordable Care Act (ACA) imposes a massive new sales tax on health insurance. The tax begins at $8 billion in 2014 and rises to $14.3 billion in 2018. Thereafter it increases annually based on premium growth. The new health insurance tax will raise the cost of coverage for small employers, individual market customers and beneficiaries in public programs. Taxing health insurance contradicts the goal of health care reform – making coverage more affordable.
Who is impacted by the premium tax?
While the tax is assessed on health plans, experts agree that it will impact consumers and employers who purchase coverage directly from a health insurance plan in the individual and employer markets as well as beneficiaries in public programs.
What is the total impact of the premium tax?
While one of the goals of the ACA is to make coverage more affordable, the new sales tax on health insurance will have the opposite effect. The Congressional Budget Office has said that this tax will be passed along to individuals and small businesses in the form of higher health insurance premiums. According to Douglas Holtz-Eakin, former director of the CBO, the tax will place an upward pressure of $135 billion on premiums over the next 10 years and will add as much as 3% per year ($475) to the average family premium, or nearly $5,000 per family over a decade.
“Estimated Premium Impacts of Annual Fees Assessed on Health Insurance Plans”
Oliver Wyman
“Premium Tax—Ending the Sales Tax on Health Insurance That Raises Costs for Families, Small Businesses, Seniors, State Governments, and Taxpayers”
AHIP Issue Brief
“Higher Costs and the Affordable Care Act, The Case of the Premium Tax”
Douglas Holtz-Eakin, American Action Forum
“Cost of the Insurance Premium Tax to Individuals and Families”
Edmund Haislmaier, The Heritage Foundation
The Wall Street Journal:
“And don’t forget a new annual fee on health insurance providers starting in 2014 and estimated to raise $60 billion. This tax, like many others on this list, will be passed along to consumers in higher health-care costs.”
Douglas Holtz-Eakin, former CBO Director:
“The premium tax alone means that American families will pay as much as $135 billion more in insurance premiums over the next 10 years.”
Dan Danner, NFIB:
“While couched as a tax on insurers, the HIT will actually mean billions of dollars in new taxes on the fully-insured market. Those taxes will result in a deluge of higher costs for those consumers who purchase health insurance coverage from this market: small businesses.”
Robert Zirkelbach, AHIP (Inside Health Reform):
“The [AHIP] spokesperson said it was important to recognize that the fee, apart from affecting affordability of coverage for small business, will raise costs for individual market customers and seniors in Medicare Advantage.”
NFIB Letter to Congress:
“Instead, what we have heard repeatedly are the voices of job creators who have said that they will not create jobs because the healthcare law is financed through destructive job-killing policies including: New taxes on small business health insurance plans.”
Janey Moores, Kentucky Small Business Owner:
“The [premium tax], one of the largest taxes in the health care law, will dramatically increase the cost of health insurance plans for small-business owners and will impede their ability to hire more of our unemployed family members and neighbors.”
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