After flying under the radar since the passage of healthcare reform, one of the law’s mandates recently sparked a huge controversy and a new piece of legislation. 

The reform law’s health insurance tax (HIT) is slated to take effect in 2014. It is a requirement that health insurance companies pay a tax on premiums written in the fully-insured market.

A new bill introduced in the Senate, The Jobs and Premium Protection Act, would repeal the HIT tax.

Opponents of the HIT have said it’s actually a tax on businesses, claiming insurance companies will simply pass the tax along to those purchasing fully-insured health plans — primarily small businesses.

A release on the website of Senator John Barrasso (R-WY), who helped introduce the bill, says 87% of small businesses purchase insurance in the fully-insured market, as do the self-employed and uninsured — and those are the three groups who will be hit hardest by the tax.

It goes on to say this pass-through tax “will impose $87 billion in costs on businesses and their employees in the first ten years, diverting revenue that could be used for higher wages, new hires, and capital investment.”

The purpose of the tax: To help cover the costs of the reform law’s hefty price tag.

Study analyzes  HIT’s impact

The introduction of The Jobs and Premium Protection Act comes on the heels of a recent study by the National Federation of Independent Business’ Research Foundation, which painted an unflattering picture of the HIT tax.

Stats from the study:

• The HIT would reduce private sector jobs by between 125,000 and 249,000 in 2021, with approx 59% of those losses coming from the small business sector, and
• It would reduce U.S. sales in 2021 between $18 and $30 billion, half of which would be lost by small businesses.

Are you in favor of repealing the HIT tax? Share your opinions in the Reply box below.

Tags: health insurance tax, HIT, HIT tax, Jobs and Premium Protection Act, study