Health insurance tax repeal gaining traction

Photo credit: Associated Press Photo credit: Associated Press

The health insurance industry is pushing legislation that would repeal the new tax on health insurance plans — and it has some serious support.

The Jobs and Premium Protection Act (H.R. 763), bipartisan legislation to repeal the health insurance tax in President Obama’s health care law, now has 218 cosponsors in the House, America’s Health Insurance Plans reported this week.

For months, the carrier group has slammed the tax and thrown its support at the legislation to repeal it.

The House bill was introduced by Reps. Charles Boustany, R-La., and Jim Matheson, D-Utah.

The Patient Protection and Affordable Care Act imposes a new sales tax on health insurance that starts at $8 billion in 2014, increases to $14.3 billion in 2018, and will increase based on premium trend thereafter. The Joint Committee on Taxation estimates that the health insurance tax will exceed $100 billion over the next decade.

Revenue from the tax will help pay for PPACA, which is expected to extend coverage of millions of uninsured Americans.

Opponents argue the fees would be largely passed through to consumers in the form of higher premiums on private coverage.

“Taxing health insurance makes it more expensive, and that is the opposite of what health care reform was supposed to accomplish,” AHIP President and CEO Karen Ignagni said.

In comments submitted to the House Ways and Means Committee Work Groups in April, AHIP wrote the “tax will be particularly painful for vulnerable populations, including consumers who buy coverage on their own, small business owners who struggle to provide coverage to their employees, seniors who rely on the Medicare Advantage program as a health care safety net, and low-income people who are served by state Medicaid programs.”

Small business groups also have been fighting back against the tax, arguing it will kill thousands of private-sector jobs.

A study by the National Federation of Independent Business suggested that the health care tax could reduce private-sector employment by several hundred thousand jobs over the next decade, more than half of which would come from small businesses.

But in testimony last month Paul Van de Water, an economist with the Center on Budget and Policy Priorities, said that those claims that the tax will kill jobs were "unfounded."

"CBO foresees a small net reduction in labor supply, primarily because some people who now work mainly to obtain health insurance will choose to retire earlier or work somewhat less, not because employers will eliminate jobs," he said.

The bottom line, the administration has argued, is that the tax is needed to help pay for the law.

"The health insurance tax forms part of a carefully thought-out structure to expand health insurance coverage and slow the growth of health care costs without adding to the budget deficit," Van de Water said. "Any effort to modify or repeal this tax must not undercut any of these critical objectives."

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