Congress can Prevent Taxpayers from Getting Hit with Health Insurance Tax | Citizens Against Government Waste

Congress can Prevent Taxpayers from Getting Hit with Health Insurance Tax

The WasteWatcher

With only a couple weeks left on the 2019 legislative calendar and much of the air on Capitol Hill being consumed by impeachment, Congress is missing out on a painless bipartisan victory that could save taxpayers hundreds of dollars in health insurance premiums.

The Health Insurance Tax (HIT), a product of the Affordable Care Act, is essentially a sales tax on health coverage.  While the HIT was projected to help pay for Obamacare with little cost to the everyday consumer, a 2018 study by consulting firm Oliver Wyman found that the HIT significantly increases the cost of coverage for consumers and small businesses alike.  Understanding the negative impact that HIT has had on taxpayers, Congress approved a one-year suspension of the tax for 2019.  The HIT moratorium saved families and businesses hundreds of dollars in health insurance costs from individual and employer markets, to Medicaid and Medicare beneficiaries.

Unfortunately, the suspension will only last until the end of the month.  Starting January 1, 2020, the HIT will once again be imposed, increasing costs for 142 million consumers.  This includes an estimated $196 annual increase for individuals, $241 for Medicare Advantage recipients, $458 for those with family coverage in the large group market, and $479 for small business employees with family plans.  Half of the tax is also paid for by lower-income families earning between $10,000 and $50,000.  In total, the HIT is expected to cost around $16 billion annually, raising costs to more than $260 billion over the ten-year window.

Fortunately, there is still time left for Congress to act.  The best solution would be for Congress to pass S. 80 and its companion bill H.R. 2447, which would repeal the tax entirely.  However, the most likely, and equally acceptable, route is to put S. 172 and H.R. 1398 up for a vote, which would extend the current moratorium for two years.

Republicans and Democrats can agree that the HIT does significant harm with little revenue benefit.  By repealing or extending the suspension of the tax, Congress can bring more certainty to health insurance marketplace, fuel small business confidence, and save hundreds for individuals and their families, who simply cannot pay even more for healthcare.  Getting legislation on President Trump’s desk that blocks the HIT is an easy win for Congress and a welcome gift for taxpayers in 2020.

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The WasteWatcher: The Staff Blog of Citizens Against Government Waste