If you have health insurance, you will be paying 2 percent to 2.5 percent more beginning Jan. 1, thanks to a new tax created to partially fund the Patient Protection and Affordable Care Act (PPACA). Called the Health Insurance Tax, or HIT Tax, it needlessly adds to the cost of health insurance that individuals and small businesses purchase.
The tax will be assessed on almost all health insurance policies, individual policies, small group policies, Medicare advantage policies for seniors and Medicaid managed care policies for the needy. It will be collected by your health insurance company, and paid by employers, employees and their families. The only group that escapes the tax is large corporations that are able to self-insure their health insurance.
Modest taxes on insurance premiums are a traditional state revenue source. Florida has had a premium tax for more than 60 years. Forty-six other states depend on some form of an insurance premium tax. In Florida, through responsible state management, the insurance premium tax has been kept low at 1.75 percent (far lower than the feds’ opening bid of 2 percent to 2.5 percent).
The new federal insurance premium tax is a “stacked” tax. You will pay the new federal tax on your insurance premium, and on the amount of state premium taxes you already pay!
But Gov. Rick Scott and the Florida Legislature can help.
With a projected budget surplus in excess of $500 million, Scott is pursuing ideas to cut taxes and fees to help Floridians, and we think offsetting the impending impact of PPACA is a great place to start. And it is within the Legislature’s capacity to take action to mitigate the increased health insurance costs that the Affordable Care Act creates.
They can cut the state premium tax on health insurance policies. This would indeed offset PPACA’s tax increase, helping bring down health care costs and ensuring that small-business owners aren’t double burdened by high health insurance costs at both the state and federal levels.
But remember, reducing the state premium tax wouldn’t just help small businesses — it would help nearly all Floridians. The HIT tax will entirely be passed on to consumers in the fully insured marketplace, where almost all business owners, employees and their families secure their health insurance coverage, jeopardizing reasonable health care costs for all of Florida’s citizens.
During this month’s legislative committee week in Tallahassee, the House Finance and Taxation Subcommittee heard public testimony on some of the ideas to cut taxes. Cutting the state premium tax was one of the key possibilities that was discussed, as it would deliver tax relief to almost all Floridians.
I’m sure the governor and the Legislature will continue to hear a long list of great ideas to cut taxes and fees, but they should prioritize mitigating the impact of raising Florida’s health insurance costs by eliminating the state premium tax on health insurance policies for Florida’s small businesses, their employees, and their families. I implore them to soften the blow of PPACA-driven health insurance cost increases on Floridians.
Jerry Pierce is chairman of the National Federation of Independent Business.