Stop the Small Business HIT of Health Insurance Reform?

“Stop the HIT Coalition” (HIT = health insurance tax) Aims to Torpedo Health Insurance For All

Small business industry is about to be used (again) by large corporate interests and conservative congressmen. About 25 business groups have joined forces in an effort to repeal health care reform’s tax on health insurance companies.

This tax starts at $8 billion a year in 2014 and will rise to $14.3 billion in 2018. It was included in health care reform as a way to help pay for the legislation.

No doubt — especially given these trying times for small business owners — these numbers and the prospect of this being an additional cost for small businesses invokes heart palpitations.

The business groups behind the “Stop the HIT” effort fear  — well, they want you, small business owners, to fear — that insurers will pass on the cost of this tax to their customers: you. That’s something small businesses can’t afford.

For instance… stated Dan Danner, president of the National Federation of Independent Business, one of the coalition members,

“This new tax will be almost entirely passed from insurers to small businesses and their employees, raising health care costs and increasing economic uncertainty for this vital sector.”

Really? Maybe. But, likely… Not.

Other coalition members include the overly aggressive and well-funded U.S. Chamber of Commerce, the anti-labor-union National Association of Manufacturers, and the American Council of Engineering Companies, et al. These wealthy and powerful bodies hardly represent the interests of small business, but their actual powerful and wealthy clients have much “perceived” to be at stake in seeing that citizens are not afforded universal opportunity for access to health insurance.

Though he knows the Senate will not pass and Obama would veto, Republican Senator Jon Kyl of Arizona unveiled legislation that would 1) repeal the health insurance tax and also 2) seeks to repeal health care reform’s employer mandate, requiring businesses with 50 or more employees to provide insurance or pay a fee to the government.

The “penalty fee” for failing to provide health insurance to employees is important as it helps to cover the costs of health care obtained by the uninsured without ability to pay that must then be absorbed by the government, health institutions, and those who do maintain insurance. In other words, the fee helps to cover the cost of “free riders” and encourages businesses to provide employee coverage.

  • A federal tax credit offsets much of the small business’ increased cost for providing coverage —  though, remember, that it is the employees who must purchase the health insurance that must pay the bulk of costs and not the actual small business owner.
  • The new law stipulates that small businesses with 50 or more employees must, along with larger businesses, provide an opportunity for employees to purchase health insurance; the law does not stipulate that such businesses must pay for all or excessively subsidize such insurance costs.
  • Employees earn too little to afford such insurance premiums? There’s a tax credit and other programs also to assist your low-wage-earning employees so that they can afford the insurance, too.

When it comes to health insurance reform, the U.S. Chamber of Commerce seeks to scare the dickens out of stressed small business owners because then — according to Bruce Josten, executive vice president of the U.S. Chamber of Commerce — “anything is possible” when it comes to rolling back the law.

The coalition contends the health insurance tax will cost small-business owners and their employees $87 billion over a decade. A worker with a family plan will see their take-home pay drop by $5,000 over a decade as a result of the premium increases resulting from the tax, the coalition contends…

…Scary? Yes.

Would that it were… but it isn’t.

Rightly so: Not all small-business groups drank the kool-aid of this argument: 

  • First off, in business, cost increases are rarely passed along in full when an industry has gross margin to absorb some or most of the hit.
  • The Main Street Alliance, which supported health care reform, thinks the law’s new regulations over insurers will keep them from passing on this tax to their customers.
  • The Department of Health and Human Services last week issued a regulation subjecting health insurance premium hikes of 10 percent or more to state or federal reviews.
  • Another regulation will force insurers in the small-group market to provide rebates to their customers if they spend less than 80 percent of their premium dollars on medical care and quality-improvement activities.
  • Both of these regulations will curb premium hikes.
  • The Alliance also points out that insurers make plenty of money and can afford to pay higher taxes without socking it to their customers. “Health insurance companies are reporting the biggest profits in their industry’s history,” said Alliance member David Borris, a small restaurant owner in Northbrook, Illinois. This situation is called excess profits (or rents) and competition serves to preclude such price increases from being passed to any great extent, or even at all.

Why would the Chamber and other groups advocating for small businesses go to bat for the insurance industry?

“This looks like another case of small-business identity theft—hiding behind small-business arguments to defend big insurance profits,” Borris rightly said.

Don't Take Away My Opportunity Before I've Had It! It Is A Big F%$#@* Deal!


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