Chamber of Commerce: Obamacare Insurance Tax Will Cause More Premium Hikes

Tax estimated to increase premiums by as much as $300 per average insured individual

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The Affordable Care Act’s health insurance tax will lead to more premium hikes if it is not repealed, according to the Chamber of Commerce.

Obamacare mandated that the health insurance industry as a whole be taxed a fixed amount each year. This tax would be split between insurers based on their proportional market share as measured by total premiums.

The tax cost health insurers $8 billion in 2014, the first year the Affordable Care Act went into effect. That collective tax rose to $11.3 billion in 2015 and 2016. I will rise to $13.9 billion in 2017, and will rise again to $14.3 billion in 2018.

“The logic behind this tax is that insurance companies will make money from increased enrollment due to the ACA, and therefore should pay more to the federal government,” said Robert Book, a health care and economic expert at the American Action Forum.

“However, in order to remain in business, as well as to meet state and federal solvency and actuarial requirements, insurers will have to pass most of this tax along to policyholders in the form of higher premiums, or possible higher average out-of-pocket costs or reduced benefits,” he said.

Book estimated that in 2018 the tax on insurers will result in premium increases of $100 to $300 for an average insured individual or $450 for a family with employer-sponsored coverage. Other estimates say the tax will raise premiums by $5,000 per family over a decade.

“Without immediate repeal, the Obamacare health insurance tax will start hitting premiums again as early as February,” the U.S. Chamber of Commerce said. “The reason is simple: As small businesses and consumers begin enrolling in health insurance coverage for 2018, they will begin paying premiums which include this tax.”

“Insurance policies that provide coverage into calendar year 2018 will factor this tax into premiums,” the chamber said.

The chamber said that other Affordable Care Act taxes, such as the medical device tax and “Cadillac Tax,” will also cause health care costs to rise.

Business owners have spoken out against the tax, saying its burden prevents them from hiring new employees.

Pete Bitar, who owns the Anderson Innovation Center in Indiana, said he could expand his workforce if the tax was dropped.

“It’s a substantially larger impact than $500 per employee per year,” he said. “It’s been more like $2,500 per employer per year. Especially when we have a larger employer portion, we could spend that money alone on a new employee.”

Clay Pinson, a business owner in Baton Rouge, Louisiana, said he could use the money to encourage more hiring.

“If Congress were to repeal this tax, we could use this money to offer additional benefits to our employees,” Pinson said. “We can also use this money to encourage additional hiring. Most importantly it would provide us the comfort to know that we’re going to be ok this year.”

The Department of Health and Human Services did not respond to requests for comment.

Ali Meyer

Ali Meyer   Email Ali | Full Bio | RSS
Ali Meyer is a staff writer with the Washington Free Beacon covering economic issues that expose government waste, fraud, and abuse. Prior to the Free Beacon, she was a multimedia reporter with CNSNews.com where her work appeared on outlets such as Drudge Report and Fox News. She also interned with the Heritage Foundation and Pacific Research Institute. Her Twitter handle is @DJAliMeyer, and her email address is meyer@freebeacon.com.

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