Tax is one of several in Affordable Care Act designed to pay for expansion of health insurance.
New Orleans-area small business owners say a tax assessed on insurance companies as part of the federal health care law will end up punishing them instead, possibly forcing them to trim employee benefits. They want to repeal that part of the Affordable Care Act, one of several components of the bill designed to pay for an expansion of health care to the uninsured.
U.S. Rep. Charles Boustany, R-Lafayette, is sponsoring a bill to eliminate the tax, an annual fee imposed on insurers based on the size of their business. Observers expect insurance companies will pass on the cost to customers, whether people who buy insurance for themselves or businesses that purchase coverage for employees.
The tax will raise $87 billion between 2014 and 2019, according to estimates by a coalition of business groups supporting Boustany's legislation. Renee Amar, state director for the National Federal of Independent Businesses, said the group estimates a typical family's policy premium could rise as much as $500 annually.
This tax is a problem for smaller businesses, which buy insurance for employees, but less of a problem for larger companies, which often self-insure, Amar said.
Efforts to repeal various tax components of the Affordable Care Act have so far been unsuccessful in Congress. Last year, the U.S. House approved a bill to eliminate an excise tax on medical devices that goes into effect this year, but the legislation was never taken up by the Senate.
At the offices of Auto-Chlor Services in Jefferson, several business owners said they are troubled by the uncertainty surrounding implementation of the new health care law. While much of the bill goes into effect next year, the U.S. Department of Health and Human Services is still issuing regulations. In many states, including Louisiana, the federal agency is also in the beginning stages of setting up new health insurance marketplaces, called exchanges, where people and businesses can buy insurance.
Dickie Brennan, who owns several restaurants in New Orleans, said he's concerned escalating premiums will force him to cut other employee benefits, such as programs to help workers buy their first houses or go to school.
"It affects individuals we are trying to help," Brennan said, asking a representative from U.S. Senator Mary Landrieu's office to encourage her to vote to repeal the insurance tax.
Executives with Auto-Chlor, which partially self-insures its employees, said they have already been informed that another fee on insurance companies to help pay for operation of the exchanges will cost them $63 for every individual covered under their plans. That amounts to $50,000 each year, they said.
Michael Mitternight, who owns a Metairie-based air conditioning company, said he pays the entire cost of his nine employees' premiums. But if the costs increase too much, he might consider giving them raises and dropping their coverage so they can buy insurance on their own.
Proponents of the federal health law hope the exchanges will improve competition in state insurance markets and, perhaps, help both small business owners and individuals get better rates. Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, which supports the health care law, said the exchanges will allow insurance companies to spend less on administrative costs, which should hold down costs.
Mitternight said he hopes the exchanges will end up being helpful. But at the moment, there just isn't much clarity about it all will work, he said. "There are so many uncertainties with the exchange," he said.
Van de Water said the law necessarily paid for the expansion of care without adding to federal budget deficits. This was done largely through cuts to Medicare and taxes on various health-related industries.
That money pays for the expansion of Medicaid, which provides coverage for lower-income people, as well as subsidies that will help families with incomes up to 400 percent of the poverty level buy insurance on exchanges.
"Not paying for the expansion of health coverage would have been worse," Van de Water said.
Boustany has not identified spending cuts to offset the lost taxes if the fee is repealed. In an email, Neal Patel, his spokesman, said Congress should look at all aspects of the "bloated federal bureaucracy" for spending cuts.
"It's irresponsible to allow this tax to go into effect which will hurt our economy, kill jobs and penalize small businesses and families," he said.