WASHINGTON – A tax that’s designed to partly fund health care reform could actually prompt some small businesses to stop offering health insurance, witnesses said Thursday at a congressional hearing convened by Rep. Chris Collins, R-Clarence.
The health insurance tax will collect $8 billion from insurers in 2014, and that total will increase to $14.3 billion by 2018. And while the millions of first-time enrollees in the health care system are supposed to provide the revenue to allow insurers to pay the tax, witnesses at the hearing said insurers most likely will pass the tax on to consumers in the form of higher premium.
That’s a matter of grave concern, said Collins, who chairs the Small Business Subcommittee on Health and Technology, which held the hearing.
“The main lesson I learned was that the impact of this on small business is going to be devastating,” Collins said after the hearing. “Even the minority witness [who defended the tax] said yes, a chunk of that tax is going to be paid in terms of higher premiums.”
Under the health care reform law that is set to take full effect next year, companies that employ more than 50 full-time workers will have to provide insurance to their employees or pay a penalty. But the tax may have a serious impact on smaller companies, said William Dennis Jr., senior research fellow at the National Federation of Independent Business Research Foundation.
Dean Norton of Elba, the president of the New York Farm Bureau, agreed. He called for the repeal of the tax, saying it would be an undue burden on small family farms and other small businesses.
“Repealing this counterproductive tax will certainly prevent premium increases for individuals and small businesses,” Norton said.
Nevertheless, the witness at the hearing whom Democrats named to the panel – Paul N. Van de Water of the Center on Budget and Policy Priorities – downplayed the impact of the tax.
He said that the health care law was likely to put downward pressure on the cost of insurance to the point where the impact of the tax would be negligible, even if, as is likely the case, part of it is passed on to consumers.
“The health insurance tax forms part of a carefully thought-out structure to expand health care coverage and slow the growth of health care costs without adding to the budget deficit,” Van de Water said.
And Rep. Janice Hahn, D-Calif., said that while the tax may increase insurance rates, it should be viewed in the larger context of health reform, “which has done a lot to make health insurance more affordable, dependable and meaningful.”