The Health Insurance Tax — also known as the HIT tax — was an ill-considered part of the Affordable Care Act. It applies a steep levy to every small business health plan. In 2020, the HIT tax will cost about $500 per insured employee. That means a small business with just 10 workers will owe an extra $5,000 if the HIT tax is in effect.
Members of Congress have repeatedly signaled that they understand the harmful effects of raising health-care costs on small businesses. Several times, our elected leaders have passed legislation suspending the HIT tax, including for 2019. In each case, this has helped prevent sharp premium increases, so small businesses could better afford employee health insurance. Unfortunately, no permanent solution to eliminate the HIT tax has yet been found, and it will automatically reinstate for 2020 unless Congress takes action again.
Health insurance companies are finalizing their 2020 rates and open enrollment starts soon. Unless a HIT delay bill is enacted, the prices small businesses see when shopping for a health plan will include its impacts and owners may be “locked in” to paying these unnecessarily high rates.
Given the gridlock and distractions in our nation’s capital, the fate of the HIT tax has become a nail-biter. Some small business owners are already bracing for increased health plan costs, and others will follow suit if indeed Congress fails them.
Depending on the business, that may mean delaying hiring activity, halting a planned wage increase, putting off a key business investment, or reducing other parts of the benefits package. It could also mean passing on more health-care costs to employees, by selecting a health plan with higher deductible and co-pays or asking for a greater contribution toward the premium out of every worker’s paycheck. No matter how small businesses tighten the belt, their decisions will have a downstream impact on our economy and working families.
We are advocates for helping businesses continue growing, and work hard to put the right strategy in place for the health of our member businesses. Contact us today to learn more about our association and programs.