As part of President Obama’s health care reform bill passed in 2010, the Affordable Care Act (ACA) created a new tax on a type of health care plan offered by many small businesses, including lumber dealers. The health insurance tax (HIT) is levied against companies offering fully-insured plans that is then passed on to employers and employees in the form of higher premiums.
The HIT first took effect in 2014 and was $8 billion. For 2015 and 2016, the tax is $11.3 billion annually.
The good news is it has been suspended for 2017 as part of the Omnibus Spending bill passed and signed into law on December 18, 2015. However, after the moratorium in 2017, the tax will be $14.3 billion in 2018. In 2019 and beyond, it increases annually based on premium growth.
Although a temporary suspension of the HIT is a step in the right direction, full repeal is needed to ensure certainty and affordability for small businesses.
Health care remains a major expense for employers that offer coverage to their employees. In a recent Kaiser Family Foundation survey, for 2015 average annual premiums for employer-sponsored health insurance were $6,251 for single coverage, of which employers on average paid $5,180. The average premium was $17,545 for family coverage, with employers on average contributing $12,590.
Supporters of the ACA have opposed full repeal of the HIT on the grounds that it would add to the federal deficit. However, the HIT’s primary public policy objective is as a revenue generator for other subsidies in the ACA.
Moreover, most of the tax is paid by those who can least afford it. Approximately half of the premium increase from the HIT is paid by those with incomes between $10,000 and $50,000.
The Jobs and Premium Protection Act (H.R. 928, S. 183) has been introduced in both the House and Senate to repeal the HIT. Reps. Charles Boustany (R-LA) and Kyrsten Sinema (D-AZ) sponsored the legislation in the House, while Sens. John Barrasso (R-WY) and Orrin Hatch (R-UT) are the sponsors in the Senate.
A majority of the House already supports the legislation as 235 lawmakers have signed on as cosponsors. Companion legislation in the Senate has 39 cosponsors.
At the 2016 NLBMDA Spring Meeting and Legislative Conference held in April in Washington, D.C., repeal of the HIT was one of the major issues lumber dealers discussed when meeting with their lawmakers on Capitol Hill. NLBMDA is also a member of the Stop the HIT coalition committed to full repeal.
NLBMDA was pleased with the suspension of the HIT for 2017; however, the association remains concerned about the HIT’s long-term burden on small businesses. Full repeal of the HIT is needed to provide adequate relief to lumber dealers who offer health care coverage to their employees.