The Obamacare laws that took effect January 1 include a new fee on health insurers that is meant to generate $8 billion in 2014 to help pay for the new healthcare laws. However, critics say the new fee—though levied directly on insurers—is more like an excise tax on business owners and consumers because insurers will pass along the costs.
The fee could raise businesses’ and individuals’ insurance premiums by an estimated 2 to 2.5 percent in 2014 and rise as high as 3 to 4 percent by 2018, according to a 2011 analysis by consulting firm Oliver Wyman. "For small group coverage, this will on average increase the cost to cover an individual by about $2,800, and a family by about $6,800 over a 10-year period beginning in 2014," according to the firm.
Businesses with “self-insured” health plans, which are mostly large businesses such as Fortune 500 companies, don’t have to worry as much about the new fee because they administer their own health plans. But that means small businesses in the fully insured market are likely to get socked with the highest premium increases. An estimated 87 percent of businesses with fewer than 100 employees are in the fully insured market, according to the Department of Health and Human Services.
The overall effects of the new tax on small businesses is still uncertain, but critics say it’s unfair to disproportionately levy fees on small businesses and their employees to pay for healthcare reform. “This new tax on small business owners will raise insurance costs for already struggling small businesses and is contrary to the goals of health care reform,” according to Stop the HIT, a coalition run by the National Federation of Independent Business that’s fighting the new fee on the insurance industry.
Moreover the tax is not deductible for corporate income tax purposes, meaning “health plans pay the tax and then federal and state taxes on the taxed amount,” according to a Wall Street Journal editorial.
Some businesses may simply pass along any extra costs to their employees—but even that comes at a price. Many businesses are trying to absorb at least some of the costs of Obamacare to avoid shocking their employees with skyrocketing health insurance premiums.
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