House Small Business Subcommittee on Health and Technology Chairman Chris Collins (NY-27) today led a hearing to examine the economic effects of the upcoming health care law's insurance tax on small businesses. Beginning in 2014, the health care law imposes a new tax on the health insurance policies that most small businesses purchase. The amount of the tax will be $8 billion in 2014, increasing to $14.3 billion in 2018, and increase based on premium trend thereafter.
Among today's witnesses was Dean Norton, an Elba resident and President of the New York State Farm Bureau. Norton testified about the impact of the tax on farmers.
"The heath care law is a massive piece of legislation that is making a major impact on our lives and the economy overall," said Chairman Collins. "The numerous mandates, requirements and taxes, such as the health insurance tax (HIT), are driving up the cost for small businesses to provide health insurance for their employees. This assessment is not a partisan attack. This is a fact, substantiated by independent studies. Both the Joint Committee on Taxation and the Congressional Budget Office, among others, have said they expect a very large portion of this tax to be passed through to the purchasers of insurance in the form of higher premiums, driving up the cost of insurance for families and small businesses."
"Although the law exempts self-funded insurance plans, small businesses typically do not qualify to self-insure leaving them to pay higher premiums in a fully-funded group plan," continued Collins. "This law is bad for our economy. Without any relief in sight, it appears that the law will continue to be an anchor holding down small businesses."
A recent NFIB Research Foundation study estimated that the tax will raise the cost of employer-sponsored insurance by 2 percent to 3 percent, imposing a cost of nearly $5,000 per family by 2020. The study also projects the price increases caused by the tax will reduce private sector employment by up to 262,000 jobs by 2020, with 59 percent of the losses falling in the small business sector.
A 2011 report by actuarial firm Oliver Wyman provided national estimates of the impact of the tax on health insurance premiums. The report found the insurance tax alone "will increase premiums in the insured market on average by 1.9 percent to 2.3 percent in 2014" and by 2023 "will increase premiums by 2.8 percent to 3.7 percent."
Materials for the hearing are posted on the House Small Business Committee's website.