1 The Health Insurance Tax Will Hurt. The new health insurance tax will increase the cost of health care benefits, harming those who need help the most: small businesses, families who work for a small business or purchase coverage on their own, and seniors. o Small businesses. The health insurance tax increases the cost of health care benefits for small and midsize employers, making it more costly to provide these benefits to current employees, more costly for small business employees to pay their share of the benefits they are offered, and more costly to hire new employees. o Families. By increasing the average family premium by $400 in 2016, the new health insurance tax will make health care benefits more expensive for hard-pressed American families, not more affordable. o Seniors. As a result of the new health insurance tax, seniors in the part of Medicare known as Medicare Advantage will see fewer health benefits and higher out-of-pocket costs. Who Says the Health Insurance Tax Will Hurt? Experts agree the tax will raise the cost of health care benefits for small employers, individuals and families who purchase coverage on their own, and seniors in Medicare Advantage. o The head of the nonpartisan Congressional Budget Office says that the health insurance tax will be largely passed through to consumers in the form of higher premiums. 1 o The bipartisan Joint Committee on Taxation says that eliminating the tax would reduce family premiums. 2 o According to research done by actuarial firm Oliver Wyman, for each dollar paid in taxes, an additional $1.54 must be paid in premiums. 3
2 How Bad Will the Health Insurance Tax Hurt? Policy experts agree that this tax will cost consumers. o The Joint Committee on Taxation (JCT) estimates that the health insurance tax will add $400 to the average American family s health care costs in o Douglas Holtz-Eakin, the former director of the Congressional Budget Office, says that over the next decade, the health insurance tax will increase the cost of family premiums by $5, o According to Oliver Wyman, an individual buying coverage in 2014 will pay at least $110 more in premiums, small businesses will pay $360 more for each family they cover, and seniors covered by the Medicare Advantage program will face $220 in reduced benefits and higher costs. 6 o The National Federation of Independent Businesses estimates that the health insurance tax will result in a quarter of a million private sector jobs lost by 2021, 59 percent of which will come from small businesses. 7 o The health insurance tax is estimated to reduce GDP by up to $35 billion by The Hurt Is Coming. Health insurance policies that cover people for all or part of 2014 will include the cost of the tax. Millions of consumers and small businesses will feel the impact of the tax on their premiums when open enrollment begins in the health insurance exchanges on October 1, 2013, for coverage that begins January 1, Seniors in Medicare Advantage will feel the impact of the tax when their 2014 coverage begins. There Is Still Time to Act. Congress should take action before January 1, 2014, to protect small businesses, families and seniors from higher health care costs. 1 Congressional Budget Office, Letter to Senator Evan Bayh (November 30, 2009). 2 Joint Committee on Taxation, Letter to Senator Jon Kyl (June 30, 2011). 3 Oliver Wyman, Estimated Premium Impacts of Annual Fees Assessed on Health Insurance Plans (October 30, 2011). 4 Joint Committee on Taxation. 5 Douglas Holtz-Eakin, Testimony before the House Ways and Means Committee (January 26, 2011). 6 Oliver Wyman. 7 National Federation of Independent Business, Effects of the PPACA Health Insurance Premium Tax on Small Businesses and Their Employees: An Update (March 19, 2013). 8
3 What is the Affordable Coverage Project? The Affordable Coverage Project is a campaign initiated by America s Health Insurance Plans (AHIP), the National Association of Manufacturers (NAM) and the U.S. Chamber of Commerce to build support for repealing the new health insurance tax before it hurts small employers, families and seniors by raising the cost of the health care benefits on which they rely. The Affordable Coverage Project solely advocates on the new health insurance tax and not other issues related to health reform or taxes. What is the health insurance tax? The Affordable Care Act (ACA) includes a new tax that health insurance companies must pay on the benefits they provide to individuals, families, small and mid-size employers, beneficiaries in Medicare Advantage, and state Medicaid managed care programs. This new tax starts at $8 billion in 2014 and rises to $14.3 billion in The Joint Committee on Taxation (JCT) estimates that the tax will exceed $100 billion over the next ten years. 1 Who will be affected by the health insurance tax? The health insurance tax will increase the cost of health care benefits for those who struggle the most to afford it: individuals and families who purchase health insurance on their own, small and mid-size businesses that purchase fully insured policies, Medicare Advantage beneficiaries, and state Medicaid programs. What will the impact be? The Congressional Budget Office (CBO) says that the health insurance tax will be largely passed through to consumers in the form of higher premiums. 2 The Joint Committee on Taxation (JCT) says that getting rid of the tax could lower the cost the average family premium in 2016 by $350 to $ According to former CBO director Douglas Holtz-Eakin, The premium tax alone means that American families will pay as much as $135 billion more in insurance premiums over the next 10 years. 4
4 Holtz-Eakin forecasts that over 10 years, the health insurance tax will increase the cost of each family s premium by approximately $5, A 2011 analysis by Oliver Wyman estimates that the cost of individual premiums will increase by approximately $2, The Oliver Wyman analysis estimates that the health insurance tax will increase premiums in the insured market on average by 1.9 percent to 2.3 percent in 2014, and by 2023 will increase premiums 2.8 percent to 3.7 percent. 7 According to the Oliver Wyman analysis, the health insurance tax will mean that in 2014 alone: o An individual purchasing health care coverage will pay $110 in higher premiums. o Small businesses will pay an additional $360 for each family they cover. o Seniors enrolled in Medicare Advantage will face $220 in higher out-of-pocket costs and reduced benefits. o State Medicaid managed care plans will incur an additional $80 in costs for each beneficiary. 8 According to Oliver Wyman, "for each dollar paid in taxes, an additional $1.54 in premium must be collected. 9 States that rely on Medicaid managed care plans to coordinate care and improve health outcomes will bear up to $14.9 billion in additional costs, increasing pressure on already constrained state budgets and incentivizing states to drop these plans and revert back to the flawed fee-for-service Medicaid model. 10 What is your position on the Affordable Care Act? The Affordable Coverage Project focuses solely on the new health insurance tax the Affordable Care Act (ACA) levies on policies sold to consumers, small and midsize employers, Medicare Advantage beneficiaries and state Medicaid managed care plans. The group does not engage on other issues related to health reform or taxes. This new tax will make it harder to achieve the goals of health reform because this tax makes health care benefits more expensive, not more affordable. Would repealing the health insurance tax de-fund the Affordable Care Act? The health insurance tax was among the taxes included as legislative pay-fors during congressional passage of the ACA. But unlike the dedicated payroll taxes that directly fund Social Security and Medicare benefits, the revenue from the health insurance tax goes to the general treasury it is not a dedicated source of program funding for the coverage expansion in the ACA. Revenue in the general treasury pays for a wide range of government activities, such as defense and education. In fact, because it raises the cost of health care coverage, the health insurance tax ironically will raise the cost of providing federal health insurance subsidies under the ACA.
5 1 Joint Committee on Taxation, Letter to Senator Jon Kyl (June 30, 2011). 2 Congressional Budget Office, Letter to Senator Evan Bayh (November 30, 2009). 3 Joint Committee on Taxation. 4 Douglas Holtz-Eakin, Testimony before the House Ways and Means Committee (January 26, 2011). 5 6 Oliver Wyman, Estimated Premium Impacts of Annual Fees Assessed on Health Insurance Plans (October 30, 2011) Milliman Inc., PPACA Health Insurer Fee: Estimated Impact on State Medicaid Programs and Medicaid Health Plans (January 31, 2012).
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