What is the health insurance tax?
Beginning in 2014, the health reform law imposes a new sales tax on health insurance that will increase the cost of health care coverage. The amount of the tax will be $8 billion in 2014, increasing to $14.3 billion in 2018, and increased based on premium trend thereafter. The Joint Committee on Taxation estimates that the health insurance tax will exceed $100 billion over the next ten years.
How will the tax impact you?
The Congressional Budget Office (CBO) has said that this tax will be “largely passed through to consumers in the form of higher premiums.” A 2011 analysis by Oliver Wyman estimates that this tax “will increase premiums in the insured market on average by 1.9% to 2.3% in 2014,” and by 2023 “will increase premiums 2.8% to 3.7%.”
An updated report by Oliver Wyman, “Annual Tax on Insurers Allocated by State,” estimates the impact this tax will have on individual market consumers, employers, and Medicare Advantage beneficiaries in all 50 states, as well as the impact on state Medicaid managed care programs. Using this data, AHIP has developed infographics for each of the 50 states and Washington, DC, detailing the effect of the tax.
This tax will add a financial burden on families and small businesses at a time when they can least afford it, and it should be repealed. AHIP supports legislation (H.R. 763, S.603) that would repeal the tax.
AHIP has launched Time for Affordability to raise awareness about how the health insurance tax and other provisions will affect premiums.
“Annual Tax on Insurers Allocated by State”
“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
American Enterprise Institute:
“…this tax is an ill-designed policy that will distort the industry and raise costs for consumers.”
“…the health insurance tax will increase costs for employers, consumers and government to the tune of $87 billion. It will encourage states to return to ineffective care models for their most vulnerable populations. It will reduce health care choices for employers and consumers. In short, the health insurance tax will undermine everything that health care reform was supposed to accomplish. “
Times West Virginian:
“…if the HIT isn’t changed in some way, those pennies, nickels and dimes won’t stretch nearly as far as they do now, ultimately leading to some tough decisions for small businesses across the country. Here in the Mountain State, where 97 percent of companies are small businesses, the impact likely would be catastrophic.”
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.”
St. Paul Pioneer Press:
“As to taxes, the law imposes a $100 billion premium tax over the next decade — money that will come from you. The Congressional Budget Office states that the tax will be largely passed through to consumers via higher premiums. Many of those consumers are small businesses, meaning both employers and employees will pay higher premiums.”
You can make your voice heard in the fight to prevent the health insurance tax from ever taking effect. Sign up below to keep up to date on the latest information and news regarding this important effort.