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Politico: GOP: Insurance tax hurts small businesses

Washington, May 9, 2013 -

GOP: Insurance tax hurts small businesses
By Paige Winfield Cunningham, Politico
May 9, 2013

House Republicans homed in on the health law’s insurance tax Thursday, saying it’s yet another blow small businesses will have to endure as a result of the law.

The health insurance tax will have calamitous effects as insurers pass down the cost to purchasers in the form of higher premiums, argued Republicans — and conservative Democratic Rep. Jim Matheson of Utah — on the House Small Business Committee’s Subcommittee on Health and Technology at a hearing Thursday.

And it will disproportionately hurt small businesses, the Republicans said.

That’s because small businesses that choose to buy their employees coverage — something that’s not required of businesses with fewer than 50 workers — won’t be able to benefit from an exemption applied to the self-funded plans that are typically offered by large employers.

“[A] tax on medical devices alone has already laid off workers,” said Chairman Chris Collins (R-N.Y.), referring to the health care law’s medical-device tax. “[Businesses] can’t absorb a hundred-billion-dollar charge. I would say with some bias I agree with Max Baucus that it’s a train wreck.”

Matheson and Rep. Charles Boustany (R-La.) have introduced bipartisan legislation to repeal the insurance tax.

The tax is set to take effect in January and will raise more than $100 billion over a decade, the Joint Committee on Taxation estimates.

Democrats and their sole witness, former CBO official Paul Van de Water, conceded that the tax could contribute to a small rise in premiums. The JCT has estimated that repealing the tax would reduce prices by 2-2.5 percent each year.

But they urged caution in the matter, pointing out that the tax is part of a broader law that contains dozens of insurance market reforms, some of which could ultimately reduce premiums for some people. That’s not to mention the subsidies many consumers will receive.

And it’s just one of dozens of new taxes and fees that help pay for the Affordable Care Act, which the CBO has said will overall decrease the deficit.

Ranking member Janice Hahn (D-Calif.) said the problem isn’t necessarily the insurance tax — although she didn’t rule out lowering or repealing it. She said the real concern would be insurance companies passing the tax on to customers while enjoying large profit margins.

“I’m not feeling too bad for insurance companies right now or medical device companies,” Hahn said. “If there are places in this law we need to tweak and make better we will. But let’s direct our anger where it’s appropriate.”

The bottom line, she said, is that the health care law’s many provisions work together to improve Americans’ health coverage — and ultimately make their lives better.

“I had a friend who got married to the wrong person just so she could have health insurance,” she said. “So there will be less bad marriages because of this.”