Rx for Rising Health Care Costs: Repeal the Health Insurance Tax (HIT)

By February 19, 2013Taxation

Effective in 2014, the Patient Protection and Affordable Care law will impose a new tax on health insurance companies in the fully insured marketplace. Unfortunately, this punitive tax—known as HIT— will also drive up the cost of premiums paid by employers for their employees’ health insurance coverage, according to the non-partisan Joint Committee on Taxation.  Many smaller manufacturers will be among the employers paying more to provide health insurance for workers. According to a recent NAM survey, nearly 70 percent of NAM’s small and medium-size manufacturers buy health insurance in this market and would be subject to higher health care costs associated with the cost shifting.

We are pleased that Reps. Charles Boustany (R-LA) and Jim Matheson (D-UT) recognize that imposing a new tax on health care insurance is no way to encourage employers to provide health insurance coverage for their workers. Their new bill—The Jobs and Premium Protection Act of 2013— will repeal the HIT tax and help drive down health care costs that are currently rising for employers faster than the rate of inflation. In endorsing Reps. Boustany’s and Matheson’s bill in a February 19th letter, we noted that the additional cost of providing coverage from the HIT tax comes on top of average health insurance premium increases of nearly 10 percent experienced last year by NAM’s small and medium-size members. And it’s not just Manufacturers that are concerned. A February letter endorsing the bill was signed by 35 associations representing a cross section of industries in the business community that would also bear the burden of this new tax.

If policymakers are serious about driving down health insurance costs for employers and want to encourage employer-provided health insurance for employees, supporting this legislation would be a responsible step. Repealing the HIT would be a win-win for many manufacturers and their workers.

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