An effort to repeal a tax on insurance companies in the new healthcare reform law is gaining momentum in Congress, fueled by concerns that the fee would hit small businesses particularly hard.
The legislation would eliminate a fee on health insurance companies scheduled to take effect when the law goes into full effect next year. The fee, commonly referred to as the health insurance tax (HIT tax), will be calculated based on the plans insurers sell directly to individuals and companies, known as the fully insured market, and excludes plans set up and managed by firms themselves, called the self-insured market.
Most large companies self-insure their employees; consequently, experts warn that insurance firms will pass the added costs of collecting the fee to small businesses, which tend to purchase coverage in the fully insured market.
“It’s pretty straightforward, what’s going to happen, that the tax is going to be passed along,” Rep. Jim Matheson (D-Utah) said in an interview, noting that insurance agents and underwriters have told him as much. “It isn’t really taxing the insurance companies, it’s taxing the people paying the premiums, and in this case, that’s small business owners.”
Matheson is among a handful of Democrats who have thrown their support behind legislation repealing the HIT tax, joining nearly every Republican in the House. Recently, the bill, H.R. 763, hit the 218-cosponsor mark, enough to secure its passage in the lower chamber; the tally has since increased to 221.
Sam Graves (R-Mo.) credited the bill’s momentum to concerns voiced by small business owners, including many who have testified during hearings before the House Small Business Committee, over which he presides.
“We keep hearing that from small businesses; that they’re premiums keep going up, keep going up, and now this thing’s coming along, and they’re going to go up even more,” Graves said. “That’s the reason you’re hearing so much about this tax and why you’re seeing such bipartisan efforts to repeal it.”
However, those efforts are flying against the political headwinds on the Hill, where lawmakers on both sides of the aisle have shied away from proposals to tweak the health care law, but for different reasons.
In many cases, Democrats are hesitant to admit the law is not perfect. Some fear they will “open a can of worms” if they acknowledge potential problems and pursue targeted solutions, Matheson said.
Meanwhile, Republicans stand to gain politically if the law many oppose fails, which has deterred most from seeking anything less than full repeal.
But that has not deterred small business lobbyists from pursuing small fixes, and they are starting to see signs of progress. For instance, Sens. Susan Collins (R-Maine) and Joe Donnelly (D-Ind.) last week introduced legislation that would change the health care law’s definition of full-time employee from 30-hour workers to 40-hour workers, a move intended to keep labor laws more consistent for businesses.
“It makes sense to change this,” Donnelly told Post reporter Sarah Kliff. “From Maine to California, every business agrees a workweek is 40 hours. What we’re trying to do is reflect the common sense we have on this in America.”
Supporters of the bill include the National Federation of Independent Business. The small business lobbying group led an effort to repeal the law last year and (when that failed at the hands of the Supreme Court) later zeroed in on the health insurance tax and employer mandate provisions.
“Small business owners would appreciate any type of relief that we can get moving forward on some of these provisions in the law,” Amanda Austin, NFIB’s director of federal public policy, said in an interview. “It’s definitely a challenge from a political standpoint, but these small tweaks could make a big impact.”
Austin says the HIT tax repeal “is now teed up” for a serious debate in the fall, once lawmakers have completed work on immigration reform and other issues taking precedent right now in Washington.
Its biggest hurdle, though, may be finding ways to make up for revenue the health insurance tax was intended to generate for Obamacare. H.R. 763 would simply repeal the fee; it makes no mention of how to offset the losses, which the Congressional Budget Office estimates at $101 billion over 10 years.
“I’m not going to lie, that’s going to be a serious challenge,” Austin said, noting that her group is taking the offset discussions “very seriously.”
If proponents can find the revenue elsewhere, Matheson says there is reason to believe the bill can continue to gain supporters on the Hill.
“On a law of this magnitude, you know everything wasn’t done correctly and there are some tweaks that are going to have to happen,” Matheson said. “On a few of these issues, there’s a growing sense that some changes would be supported by a large group of people in Congress.”
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