There is no doubt that today’s small business community is bombarded with an ever-expanding list of political hot topics, each of which seem to carry with them a steadily recurring theme. In a word, that theme is one of reform.
The subject of reform, regardless of context, is usually marked by controversy, complexity and debate. For most Americans, the issue of healthcare reform is no exception. In addition to the country’s desperate need for fiscal reform, leaders in Washington continue to debate over the future of the nation’s healthcare system. One of the key components of the proposed plan for improved policy is a piece of legislation known as the
Patient Protection and Affordable Care Act (PPACA). This new law includes an $87 billion Health Insurance Tax (HIT), which will greatly increase the cost of health insurance, specifically for small business owners and the self-employed.
While this tax bill should be a reflection of the government’s ability to create a good idea and potential solution to a huge issue, it instead serves as proof of Washington’s complete inability to draft effective legislation and even goes so far as to hurt the very people it is designed to help. Given the country’s recessed economy and mounting national debt, it’s no secret that the government is looking for ways in which it can bring in additional revenue, hence the creation of the PPACA’s HIT. However, imposing this tax will have a devastating impact on small business owners who purchase insurance plans from the fully-insured marketplace.
To better explain, the PPACA will assess the HIT on all health insurance companies based on their annual “net premiums” written. The larger the insurance company’s market-share, the higher their annual HIT. Once the HIT is levied, insurance companies will essentially be left with two options: either eat the cost of paying the tax, or pass the cost of paying the tax along to customers in the form of higher priced premiums.
Due to the fact self-insured plans are exempt from the HIT; the only insurance plans that factor into the equation are fully-insured plans – the exact plans purchased by 87 percent of America’s small business owners, their employees and the self-employed.
Considering that insurance companies are for-profit businesses focused on increasing their bottom line and provide dividends to their shareholders, it is safe to assume that most, if not all, will pass along HIT costs to their customers, rather than risk reducing profits.
In fact, the
Joint Committee on Taxation, as well as the
Congressional Budget Office have both confirmed that the HIT would be passed along to consumers in the form of higher premiums for private coverage. Even more disturbing is the fact that the HIT doesn’t sunset. Meaning, this tax is continuously adjusted to increase in conjunction with the rate of premium growth for subsequent years. Case in point, current projections indicate the tax will raise $8 billion in 2014 and rise to $14.3 billion in 2018.
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One of the principal goals of healthcare reform is to help America’s small business owners obtain quality, affordable health insurance coverage. While PPACA’s HIT will certainly allow the U.S. government to gain much-needed additional revenue, it will undoubtedly place a heavy financial burden on the backs of America’s small business owners and self-employed entrepreneurs. Such a burden will only further weaken an already depressed economy and leave millions of small business owners unable to afford health insurance, ultimately defeating the entire purpose of healthcare reform. With all that said, it is alarmingly clear that leaders in Washington do not possess the basic concept of business and are virtually incapable of understanding the true impact of their decisions.
With regard to a call for action, it is important to note that legislation opposing the HIT does exist. More specifically, the proposed legislation is H.R. 1370, Repeal the Small Business Health Insurance Tax, introduced by Rep. Boustany.
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Jennifer Hice is a freelance writer and small business owner with more than 10 years of professional experience in corporate marketing and communications. Shortly after becoming a new mom, Jenny decided to pursue the “American Dream” and transform her passion and talent for writing into a viable business venture.