Published on The Waco Tribune-Herald website on 10/25/2019
By Tom Aldred, Executive Director
It is curious that many features of the Patient Protection and Affordable Care Act (or “Obamacare” for its enthusiasts) in fact do very little to make health care more affordable for Americans. A case in point is the “Health Insurance Tax” (or HIT).
This tax, billed by the law’s supporters as a “fee” charged to health insurers, is actually a funding mechanism for the flawed Affordable Care Act that is ultimately borne by individuals. Rather than a fee placed upon insurance companies, the HIT functions like a sales or excise tax on health insurance paid directly by enrollees in the form of increased premiums.
Here’s how it works: a determined fixed-dollar fee amount is distributed across almost all health insurance providers. This fee functions essentially as an excise tax in the private market that serves most small business employers and those who purchase policies individually, both on- and off-Affordable Care Act exchange plans. The tax began in 2014 at $8 billion and, prior to its temporary halt, reached a total of $11.3 billion nationwide.
Congress has taken common sense, bipartisan action to suspend the tax in the past, but the current moratorium on the Health Insurance Tax is set to expire at the end of this year. If this is allowed to happen, collection of the HIT will resume in 2020, and Texas businesses and health care consumers will face more than a billion dollars in premium increases in the next 15 months. That is unless Congress acts before January to repeal or delay the tax.
If the tax is not repealed or delayed, a recent analysis by the global consulting firm Oliver Wyman found that, beginning in 2020, Texans will be on the hook for $1.5 billion in additional premiums, causing average Texas families to see an increase of about $500 in their health insurance premiums. Seniors and individuals with disabilities will be saddled with similar increases in their Medicare Advantage plans, individual consumers can look forward to a $170 increase, and taxpayers will bear the additional brunt of a $400 million hit to the Texas Medicaid budget- all compliments of the HIT.
Congress and the Trump Administration have already taken numerous actions over the past two years to address some of the most egregious and harmful elements of the Affordable Care Act, essentially ending the individual mandate by eliminating the tax penalty for those who do not choose to purchase health insurance, and expanding access to more affordable coverage options outside of the ACA marketplace.
The Health Insurance Tax is emblematic of the Affordable Care Act’s misguided efforts to improve the health insurance marketplace and make insurance more affordable. At its core, the tax is akin to a sales tax on health insurance – raising costs and actually making coverage more unaffordable and therefore less attainable for many Americans.
This tax increase will not only further damage the health care marketplace, but it could also impact Texas’ thriving business-friendly economy. For employers, the increasing cost of health care makes it far more difficult to hire additional people and make investments needed to expand businesses. Estimates show that this tax will stifle job creation to the tune of hundreds of thousands of jobs lost and will cost small employers at least $210 more per employee and $530 per family per year.
Congress should take immediate action to fully repeal, or at least further delay, the Health Insurance Tax in order to avert the damage that it will do to Texas businesses and taxpayers.