Onerous health insurance taxes put off by Jan. 22 spending bill
The immigration stalemate that temporarily caused a government shutdown over a late January weekend was ended with a three-week funding bill that included a six-year extension of the Children’s Health Insurance Program, or CHIP, and postponed instituting two problematic health insurance taxes.
CHIP, referred to as the Denali Kid Care program in Alaska, covers 9 million American children including 17,700 Alaskans. The extension is the longest one granted to the program, which had its funding expire last September, since CHIP was created in 1997.
Two taxes to fund the Affordable Care Act were particularly dreaded by Alaskans because the taxes would be tacked onto some of the most expensive insurance premiums and health care costs in the country.
According to Alaska Chamber calculations, the 2.6 percent Health Insurance Tax, or HIT, would have taken a $500 per year chunk out of each employer-provided policy.
A second Affordable Care Act tax is what’s know as the Cadillac Tax that seeks to levy a 40 percent excise tax on the most comprehensive and expensive health insurance plans. According to Sullivan’s office, this would have impacted 90 percent of Alaskans.
The HIT was delayed until 2019 and the Cadillac tax was pushed off another two years.
This week, Alaska Chamber President Curtis Thayer expressed relief on behalf of his member businesses.
“The Chamber was supportive of eliminating the 40 percent Cadillac tax and the HIT because these taxes would have impacted a high number of Alaskans,” Thayer said. “And while it’s helpful that it isn’t being imposed now, the postponement means Congress is just kicking the can down the road.”
Thayer said what was particularly hard to swallow about the Cadillac Tax is that he knows of businesses where employees chose to forego wage increases in order to allow their employers to put those dollars into better insurance policies.
It would hit 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 affects nearly every policy in the state, Thayer said.
The HIT would have been collected from Alaska’s 69,000 small businesses that employ about 141,000 private sector workers, according to the Alaska Chamber’s numbers.
The excise taxes were enacted in the Affordable Care Act legislation that Republicans in Congress failed to repeal or amend this past summer and aimed at health insurers to collect an estimated $14.3 billion in 2018.
Congress also delayed applying the Medical Devise Excise Tax for two years, which likely would have impacted as a pass-through fee to consumers. The MDET, as its called, aimed at manufacturers and importers of devises to pay a 2.3 percent sales tax.
This one was originally imposed in 2013 to help pay for expanded health insurance under the ACA. It hit industry groups that produce such items as catheters, heart stents and artificial joints. It was estimated to raise $20 billion over a decade, according to the Medical Imagining and Technology Alliance.
Without action by Congress, which repealed the individual mandate to buy health insurance as part of the tax overhaul passed Dec. 20, the HIT and the MDET would have applied starting this month.
The continuing resolution wasn’t an ideal way to deal with the taxes, but “it served the purpose for the delay,” he added.
What the Alaska Chamber really wants is for the federal government to go back to passing 12 budget bills for each of the 12 departments of government, Thayer said.
“Congress has gone eight years of not passing the budget. A continuing resolution is not the ideal budget vehicle,” he said. “But in this case, that was the option congress and the delegation had. We’re supportive of the outcome and not the vehicle.”
The delay does serve the purpose of buying time to vet a possible repeal of the ACA excise taxes, he added.
“For right now, a one-year on one and two-year delay on the other gives time to work on a permanent solution,” Thayer said.
Naomi Klouda can be reached at firstname.lastname@example.org