Since the flawed launch of the Affordable Care Act (ACA) late last year and earlier this year, the roll-out of the new law has been plagued by a continuous trail of broken promises. Based on the belief that through “shared sacrifice” health care costs will go down for all Americans, the President sold his health care law by reiterating that it would provide more affordable health care options. Unfortunately, the facts tell a different story. So far, 21 states have posted health insurance premium bids for 2015 and insurers in all 21 have requested increased rates, some even increasing by double digits.
In response, the White House is preparing to launch a state-by-state messaging campaign aimed at protecting those Members of Congress who supported the ACA by nuancing the President’s message about affordability ahead of this fall’s midterm elections. What the President actually meant, they will claim, is that as premiums rise, Americans facing higher costs will be provided relief in the form of taxpayer subsidies. The catch? Not everyone will be offered relief, namely small businesses and working families.
The rise in health care costs has long been a concern for small business and the ACA has done nothing to alleviate those fears. Today, millions of small business owners and the Americans they employ are facing more expensive health care coverage and fewer plan options. Factor in the ongoing delay of the Small Business Health Options Program (SHOP) exchanges in 18 states, now on hold until 2016, and it’s no wonder business owners are finding it nearly impossible to plan for their health insurance future. Furthermore, states have had varied responses to the CMS guidelines on whether and how long small businesses may extend non-ACA compliant policies. The variation between states fragments the system and leaves small business owners with more questions than answers.
Unfortunately, it seems even the administration does not have the answers. When asked for basic information on how many small business owners have enrolled in the SHOP exchanges, as House Small Business Committee Chairman Sam Graves (R-MO) has twice, the question has gone largely unanswered.
Beyond the exchanges, the law’s implementation also introduced an added burden on small businesses in the form of a new tax. Originally messaged by the administration as a “fee” placed on insurers, it is actually a tax which will be passed on in the form of higher premiums for health insurance policies sold on the fully-insured market, the primary market for small businesses. During 2014 alone, the health insurance tax or “HIT” will collect $8 billion in revenue, will increase by 40 percent in 2015 to over $11 billion and will continue to rise in the years to come. Naturally, as is the way in Washington, labor unions and large corporations were granted an exemption from the tax, leaving it to fall solely on the sector responsible for over 90 percent of all new U.S. jobs, according to the Small Business Administration.
And the inevitable drag on the economy will be felt far and wide. A recent NFIB Research Foundation Survey indicated that the HIT would reduce private sector employment of 152,000 to 286,000 jobs by 2023 and reduce U.S. real GDP by between $20 billion to $33 billion during the same time frame.
While some may point to the small business health insurance tax credit as a means for offsetting the cost of the HIT, unfortunately, the substantial and growing impact of the tax outweighs any paltry benefit from the temporary and limited credit. If a small business owner qualifies for the credit, and that is a big “if” given the stringent requirements, the credit is only offered for two years, while the HIT has no end and will only continue to increase. And, ironically, the only way to claim the tax credit is through the SHOP exchanges, barring many Americans from even considering it.
It is time our President goes beyond the rhetoric and proposes real solutions for ensuring this law works for all Americans, not just those with the loudest voices in Washington. Taking action to protect small businesses from the health insurance tax would bolster small business confidence and in turn, provide a much-needed boost to our economy. In Congress, steps have already been taken to build bipartisan support for eliminating this harmful tax and recently legislation was introduced in the House to provide relief from the HIT for two years, which would at the very least allow business owners time to prepare for these added expenses.
It is these types of bipartisan opportunities for immediately reducing health insurance costs for small businesses that the administration should support, not another messaging campaign.
Dan Danner is president and CEO of the National Federation of Independent Business (NFIB), a nonprofit, nonpartisan organization that works to promote and protect the rights of small businesses to own, operate and grow their businesses.