As most people know, increasing costs for franchise small businesses translates to a restriction on the ability to grow and create jobs. With so many new rules and regulations going into effect with implementation of the Patient Protection & Affordable Care Act, the International Franchise Association wanted to notify its members of a provision which creates a new tax that will increase the cost of providing health coverage to your employees, starting in 2014.
This new provision, the Health Insurance Tax or HIT, will dramatically increase the cost of health insurance premiums for small-business owners. Franchise small-business owners across the country are especially concerned about the impact of the new health care law and the taxes and regulations included within it. In fact, the HIT will take more than $87 billion from small-business owners and the self-employed by 2019.
What is the Health Insurance Tax?
The Health Insurance Tax, which is part of the Patient Protection and Affordable Care Act that was signed into law in 2010, was levied as a tax on the large insurance companies, but in reality, this tax will be passed onto those who purchase health insurance in the fully-insured marketplace, as nearly all small-business owners and the self-employed do.
[ILLUSTRATION OMITTED]
A recent Congressional Budget Office report confirms that the HIT "would be largely passed through to consumers in the form of higher premiums for private coverage." A study by former CBO Director Douglas Holtz-Eakin indicates that the anticipated cost is as much as three percent, nearly $5,000 per family over a decade.
Beginning in 2014, the HIT will affect approximately 2 million small businesses, 3.4 million self-employed and 27 million employees. Taxing the nation's job creators is hardly sound policy as our economy continues to struggle to recover.
The Stop the HIT Coalition is working vigorously to repeal the costly health insurance tax to protect our nation's job creators and their employees. The coalition is currently generating grassroots support for repeal of the HIT by educating policymakers, small-business owners, their employees and the self-employed who will be directly affected by the HIT.
For example, a business with 50 employees will pay on average an additional $500 per employee, totaling up to $25,000 additional costs for health care a year. This is unfair to the businesses that are doing the right thing and providing health care to their employees. As the economy is working to recover, we do not need to add taxes onto our small businesses that impact local job growth.
Why does this matter to the International Franchise Association?
Small businesses on average pay 18 percent more for the same benefits than their larger business counterparts, and this tax will only add to that costly burden. Small-business owners have consistently said that controlling the increasing costs of health insurance premiums is their number one concern and should be the focus of health reform legislation.
The HIT is not helping to address this number one concern for small-business owners, in fact, it will make it even more expensive to run a business and create needed jobs. How is this sound policy? Simply put, it's not.
What is Congress doing about this?
Some members of Congress are working to repeal the HIT in both the House and the Senate. In the House of Representatives, Rep. Charles Boustany (R-La.) is leading a bipartisan group of more than 80 lawmakers in supporting H.R. 1370 to repeal the Health Insurance Tax.
In the Senate, Sens. John Barrasso (R-Wyo.), Vice Chair of the Republican Conference, Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, and Olympia Snowe (R-Maine), Ranking Member of the Small Business Committee, have recently introduced, S. 1880, "The Jobs and Premium Protection Act" to repeal the Health Insurance Tax.
Jay. B. Perron is vice president of government relations and public policy for the International Franchise Association. He can be reached at 202-662-0797 or jperron@franchise.org.
