MacIver News Service | November 15, 2017
By Chris Rochester
MADISON, Wis. – A federal health insurance tax set to take effect in 2018 will hit Wisconsin businesses, families, and taxpayers hard if congress doesn’t take action to stop or delay the tax before the end of the year.
Without action by Congress to delay or repeal the HIT, the tax is estimated to impact 156 million Americans starting next year.
The health insurance tax, or HIT, is a new federal tax on health insurance plans purchased by most small business owners, the self-employed, and farmers. All will suffer if congress lets the tax take effect, a group of Wisconsin business leaders said on Wednesday.
Without action by Congress to delay or repeal the HIT, the tax is estimated to impact 156 million Americans starting next year. Those earning an income between $10,000 and $50,000 per year will pay half of the tax, and a recent study by Oliver Wyman shows that families in the small employer market could be faced with an average of $577 in higher premiums in 2018 as a result of the HIT.
The HIT will add about 2-3 percent to fully insured health insurance plans in 2018 alone, a study by the National Federation of Independent Businesses found. The report states that nationwide, “Such price increases will reduce private sector employment by 152,000 to 286,000 jobs in 2023, with approximately 57 percent of those losses falling on small business.”
Suspended for 2017 in a broad bipartisan vote, congressional leaders planned to deal with the HIT as part of the broader effort to tackle healthcare, but those efforts fell through as congressional Republicans’ efforts to repeal and replace Obamacare failed earlier this year.
The HIT, tucked into the voluminous Obamacare legislation, “imposes fees on insurance companies that offer fully-insured health insurance coverage. The fees, which are treated as taxes under the Internal Revenue Code, are assessed on earned health insurance premiums, with certain exclusions,” the Oliver Wyman report states.
If Congress fails to repeal the tax by year’s end, the average American family can expect to see their health insurance premiums rise by more than $5,000 over the next decade.
Steve White, who owns a small manufacturing company in Genoa City, said the tax will hit his company hard. White has six people on his company’s small group health insurance plan. In recent years, the cost of providing insurance for them has gone up 56 percent. “Health insurance premiums, they’re not going anywhere but up,” the small business owner said.
The HIT will also weigh down on state coffers. In the BadgerCare program alone, the tax will add about $34 million in increased costs to taxpayers.
White said his company has felt the financial pinch of Obamacare’s broken promises. “We were promised something like a $2,500 decrease, but it’s actually swung in the opposite direction there.”
Even a relatively small savings would help his business stay afloat. “Every little bit helps. I’m definitely not sitting on some really big fat profit margins, so if it’s just a thousand dollars or two difference a year, it makes a big difference,” White said.
The HIT will especially hurt the state’s agriculture community, said Karen Gefvert, director of government relations for the Wisconsin Farm Bureau Federation, which is made up of more than 46,000 members statewide.
Farm income has recently dropped 46 percent, according to a 2017 USDA report, so the HIT would be especially hard for farmers to absorb. “Farmers are struggling right now. So during this time of depressed commodity prices, farmers are having a difficult time making ends meet,” Gefvert said.
Farmers are already paying a larger amount for their health insurance coverage because of the nature of their profession and the risks they face on the job. Not delaying the HIT would be an additional financial burden on farmers, Gefvert said.
“Delaying the HIT or repealing the HIT would definitely help ease just a little piece of the struggle they’re going through right now,” she said.
The HIT will also weigh down on state coffers. In the BadgerCare program alone, the tax will add about $34 million in increased costs to taxpayers. The HIT will also cost taxpayers additional money because it is maintaining a fully insured health insurance system for state employees and their dependents.
The tax will also apply to Medicare Advantage plans, which about half of Wisconsin senior citizens are on.
Seventy percent of businesses surveyed predicted higher deductibles, and half said cost increases would lead to higher out of pocket costs like co-insurance and co-pays.
Wisconsin already has high health care costs, and the HIT won’t help, said Chris Reader, director of health and human resources policy at Wisconsin Manufacturers and Commerce. The group represents 3,800 Wisconsin businesses in all industries.
Reader said WMC’s surveys of its members showed 92 percent provide health insurance for their employees, but those costs are going to go up. “A majority of people said they believe their healthcare costs will go up next year,” he said.
Reader said 1.2 million people are employed by 440,000 small businesses in Wisconsin.
Employers will also have to cut back in areas like research or training, and families will have to cut back, too. “Anything that will increase the cost is a negative to our members and the economy as a whole,” Reader said.
Seventy percent of businesses surveyed predicted higher deductibles, and half said cost increases would lead to higher out of pocket costs like co-insurance and co-pays. “It’s an unnecessary tax increase with bipartisan support to get rid of it,” Reader said.
There’s support from both sides of the aisle for bipartisan legislation to delay the HIT. While Sen. Ron Johnson (R-Oshkosh) supports HIT repeal, Sen. Tammy Baldwin (D-Madison) does not. “Hopefully she’ll join on and support that bill,” Reader said.
Last year, nearly 400 Republicans and Democrats voted to suspend the tax.
“There’s bipartisan support to get rid of this tax for another year. Hopefully lawmakers will hear what we’re hearing from our members and see that it’s just something they should postpone for at least another year if not get rid of altogether,” Reader said.