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Small Businesses, Lawmakers Push to Repeal 'Killer' Health Insurance Tax

April 24, 2012 - 6:00pm

A federal Health Insurance Tax scheduled to kick in by 2014 will cost small businesses $87 billion and "kill jobs," the National Federation of Independent Business says.

In Congress, an effort to repeal the tax is gaining bipartisan steam.

The "HIT" will have "irreversible consequences" on the national economy, according to the NFIB Research Foundation, which predicted the loss of nearly 250,000 U.S. jobs and $30 billion in sales by 2021 due to the tax.

"Ostensibly a tax on insurers, [HIT's] real effect will be hundreds of billions of dollars of taxation on people who purchase coverage in the fully insured market -- mostly small-business employers, employees and the self-employed," said Robert Graboyes, senior health-care adviser for NFIB.

"These are the people who usually generate around two-thirds of Americas new jobs."

Legislation aimed at repealing the HIT is attracting support on Capitol Hill -- even from a few Democrats.

Sens. John Barrasso, R-Wyo., Orrin Hatch, R-Utah, and Olympia Snowe, R-Maine, introduced The Jobs and Premium Protection Act in the Senate.

Reps. Charles Boustany, R-La., and Dan Boren, D-Okla., introduced companion House legislation that has more than 125 bipartisan co-sponsors.

Six Florida Republicans are among the co-sponsors: Reps. Jeff Miller, R-Pensacola; Bill Posey, R-Rockledge; Dennis Ross, R-Lakeland; Steve Southerland, R-Tallahassee; Cliff Stearns, R-Ocala; and Allen West, R-Plantation.

Meantime, a Stop The HIT Coalition, which includes more than 35 national organizations representing millions of small-business owners, is working to repeal the Health Insurance Tax.

A study by the management consulting firm of Oliver Wyman found that small businesses have the largest financial exposure.

For single coverage, Wyman projected that small employers will have to pony up $2,400 to $3,100 more per employee. Family coverage costs for small employers will increase between $6,000 and $7,700, Wyman said.

Costs for private family premiums will actually go up more than for small business, with increases ranging between $6,200 and $8,000.

By contrast, the HIT bypasses employers who have coverage through self-insured plans -- mostly labor unions and governments.

"Like [Obamacare's] essential health benefits and longstanding state benefit mandates, the HIT puts an anchor around the neck of small business while leaving larger organizations free to swim unburdened," Graboyes said.

The latest estimates peg HIT's initial added employer costs at $14.3 billion -- roughly 15 percent of the total small-business expenditures on employee benefits in 2007.

Big corporations wont escape unscathed. Large employers will see single-coverage costs rise between $2,300 and $2,900 over a decade.

The Obama administration says some of HIT's costs will be offset by a new credit aimed at helping small businesses and small tax-exempt organizations cover low- and moderate-income workers.

"The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have," the administration said.

"In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees."

But a report by the Joint Congressional Committee on Taxation estimated that the take-home pay of the average small-business employee would be reduced by $500 a year, thanks to HIT.

Small businesses say the yet-to-be-felt financial burdens imposed by Obamacare are retarding economic recovery.

On the heels of Tax Day when Americans take pause to remember their financial obligations, small businesses are reminded that they cannot afford another tax on their operations," NFIB said in a statement.

"If Washington truly wants to turn the economy around, they must start by repealing unnecessary, costly burdens, like the HIT, that prevent small business growth.

Amanda Austin, NFIB's director of federal public policy, said, After a disappointing unemployment report of only 120,000 jobs added last month, we need to remove the obstacles that further prohibit our nations small businesses from contributing to the economy and job market.

"The Health Insurance Tax will debilitate small businesses at a time when our nation needs them most.

Contact Kenric Ward at or at (772) 801-5341.

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