There are many great things going on in Worcester’s business community. From small biotech firms and video game companies to an array of independent retailers, restaurants, and service providers, we’ve built a sound, diverse, and growing economy.
It’s not invulnerable, however. Rising healthcare costs are challenging local businesses here, just as they are across the country. If the trend continues, wage growth and job creation for our residents could be compromised.
A pending tax before Congress could make the healthcare cost problem worse—and that means putting a stop to the health insurance tax before it takes effect.
A Health Insurance Tax (HIT) is already included in the Patient Protection and Affordable Care Act (PPACA) but has yet to be implemented. The HIT is a tax on health insurers that will, in effect, be a “pass through” tax on consumers in the fully insured marketplace, where nearly all small business and self-employed purchase their coverage. Congress postponed implementation of the tax in 2017 as a way to mitigate cost and provide price protection to consumers. They are now preparing to review the HIT again and potentially implement the tax.
The Health Insurance Tax would increase the cost for businesses providing health insurance by about $500 per employee starting next year and, within a decade, will pull $156 billion from the private sector. A study done by former Congressional Budget Office director Douglas Holtz-Eakin estimates the impact to families to be $5,000 over a 10-year period.
The forecasted impacts are extremely concerning. The tax will affect 100 million Americans, consumers, and business owners alike. A new study, by global management consulting firm Oliver Wyman, predicts that job losses could exceed 280,000, with the majority coming from the small, agile companies that serve as Massachusetts’ primary economic engine. In fact, 88% of small business owners are in the plans that would be affected and they are the least able to absorb any extra cost associated with health insurance premiums.
The HIT tax is not the appropriate remedy. People are clamoring for lower healthcare costs and greater opportunity for the middle class. The HIT works at cross-purposes to both of these goals.
At the individual business level, most Chamber of Commerce members are worried about the impacts of the new tax on how much they will be able to pay workers, as well as on the funds they’ll have available to hire, invest, and expand their companies. I’ve also heard from more than a few who are troubled by the possibility that the HIT tax could put health insurance completely out of reach, and they dread the idea of leaving their workers uncovered.
Many companies that continue to offer health coverage say they will not be able to afford the same quality plan if the HIT tax comes back. Higher deductibles, pricier co-pays, and other out-of-pocket costs will affect employees and make it harder for working families to make ends meet.
This tax jeopardizes the economic development momentum in Worcester and Central Mass. We should not let a tax that disproportionately hits small businesses slow our economy and drive up healthcare costs.
Fortunately, the HIT can be stopped if Congress acts fast. Businesses are in the process of securing coverage for 2018. Insurers need to know if the HIT tax will be eliminated, so they can lower prices accordingly – before contracts are signed and there is no looking back. Additionally, Massachusetts businesses have already been hit with a recent, per employee health care tax increase.
This is a key opportunity for Democrats and Republicans to follow through on their recent promises to put their differences aside and work together to shore up the U.S. health care system. As part of that effort, they should unite to stop this proposed tax and pursue more equitable funding measures aimed at ensuring that all Americans have access to health care.
~Timothy P. Murray, President and CEO, Worcester Regional Chamber of Commerce | Published by Worcester Telegram & Gazette 8/29/17