Mandate repealed, but insurance policies to take ‘HIT’ in 2018
Just weeks before a new 2.6 percent tax is to be levied against businesses and individuals, the Alaska Chamber says there’s not a moment to lose in convincing Congress it’s a bad idea.
Known as the Health Insurance Tax, HIT, or officially as the “health insurance provider fee,” the tax will be collected from Alaska’s 69,000 small businesses that employ about 141,000 private sector workers, according to the Chamber’s numbers.
The excise tax was enacted in the Affordable Care Act legislation that Republicans in Congress failed to repeal this past summer and aimed at health insurers to collect an estimated $14.3 billion in 2018. It was postponed from 2015 to 2017, so it hasn’t been imposed yet.
Without action by Congress, which repealed the individual mandate to buy health insurance as part of the tax overhaul passed Dec. 20 and needs to pass a spending bill before the current continuing resolution expires on Dec. 22, the HIT tax goes into effect at the turn of the new year and will impact companies that help provide their employees insurance, said Chamber President Curtis Thayer at a news conference Dec. 14 meant to raise awareness and rally businesses to let the potential impact be known.
It won’t only be levied against businesses, Thayer noted. It will be collected on any health insurance policy purchased on the federal exchange as well Medicaid Advantage plans.
Premera Blue Cross-Blue Shield, Alaska’s lone insurer on the individual market, verified there will be an impact if the tax is levied in 2018.
“We agree that if it’s reinstated, the tax would add approximately 3 percent to premiums. We are working closely with our clients and customers, keeping them updated on the potential impacts to their healthcare premiums,” said Melanie Coon, head of corporate communications at Premera.
Linda Peters, owner of ProComm Alaska LLC, sees the tax as another big hit on businesses even as they try to grow.
“The health insurance tax is just another obstacle to this growth, because it directly raises the price of the healthcare we purchase for our employees and their families,” she said.
Peters said if the tax does take effect, it is “several thousand dollars I have to pull from other areas of my company’s budget, including funds reserved for wage increases, hiring additional staff and fixing worn down equipment.”
Thayer said the Alaska Chamber, which employs three people, will be charged the tax on its Blue Cross-Blue Shield Premera insurance plans.
Thayer quoted an August 2017 study by Oliver Wyman, a global management consulting firm that crunched the numbers. It estimated the tax should raise premiums by 2.6 percent in 2018 by acting as a pass-through tax. It amounts to $500 per family for small businesses and $158 per year for an individual purchasing insurance on the exchange. Another $245 would be collected for seniors and disabled individuals on Medicare Advantage.
Chamber members are asking the congressional delegation to support efforts to suspend the tax.
“It’s a matter of drawing attention to it, not only to our delegation but other states as well,” Thayer said. “Ideally, we’d like to say ‘make the tax go away.’ But Congress has a way of kicking the can. That’s the path of least resistance. We need a permanent solution but we know we’re not going to get it. So for now, we are asking the tax be suspended again for another year.”
Repeal and replace efforts by Congress this past year didn’t address the HIT, nor did it take a fresh look at the Cadillac tax set to take effect in 2020, Thayer noted. The “Cadillac” tax is a 40 percent excise tax on employer plans exceeding $10,200 premiums per year for individuals, and $27,500 for families. It’s called the Cadillac tax because it is supposed to hit only the “best” insurance plans that cover the most, but because of Alaska’s high premium costs it effects nearly every policy in the state.
The purpose of both taxes is to help fund the ACA, Thayer said.
He warned that if the HIT is suspended again in 2018, both taxes will be stacked atop each other and cause a double whammy on small businesses in the following year. The Chamber is urging Sens. Lisa Murkowski and Dan Sullivan, as well as Rep. Don Young, to work with their colleagues to delay the tax so small businesses aren’t hit with it right after the holidays.
To illustrate how the tax strikes local businesses, Tim Agosti, owner of his family’s 50-year company, Refrigeration and Food Equipment Co, said he employs seven people. His number of employees fell outside the mandate to provide insurance, but he provides it as a job benefit. But it comes at a high cost.
“The cost is $18,000 per-year per an employee,” Agosti said. “The co-pay is $350 per month per employee. An additional 2.6 percent would go on top of that, and they’re already maxed out in what they can or should be paying.”
Agosti was able to buy into the larger employee pool insurance policies at Aetna.
Steve Colligan, owner of 3GLP Co., also supplies insurance for his employees. Each expense increase makes it harder to operate a small Alaska business because profit margins are already thin in what’s considered an Alaska recession, he said.
“This aims right at small businesses, right at the individual market place and right at the Medicaid Advantage folks. I don’t think this was thought out clearly,” Colligan said.
Naomi Klouda can be reached at [email protected].