Why We Need To Repeal The Health Insurance Tax Now

by Marilyn Tavenner

January 11, 2017

Consumers want affordability. Whether we’re buying a new cell phone, a refrigerator, or a car, all of us look for the best deals we can find. The same rule applies to health care and health insurance. That’s why policymakers are keenly focused on lowering premiums for millions of American consumers.

And they can take a giant step forward right now by repealing the health insurance tax (HIT) – before health plans price their products for next year. By addressing the HIT now, Congress and the new administration can immediately make health care more affordable for seniors and families.

The HIT is a direct sales tax on health insurance, which directly increases the premiums that people pay. Studies by Oliver Wyman found that the HIT will mean small businesses will pay an average of $280 more per employee – and individuals who purchase insurance coverage on their own will pay an extra $220 per year.

In December 2015, Congress and the Administration reached an agreement on a bipartisan budget that enacted a one-year moratorium on the HIT for the 2017 plan year.  However, without immediate action, the health insurance tax will return and at a higher cost for 2018. Health plans are currently planning their products for next year – including those for the individual market, small businesses, Medicare Advantage, and Medicaid. Those products – and their premiums – will be finalized within the next few months. Repealing the HIT now will ensure that consumers and small businesses are protected from a 3 percent premium increase, and that state budgets won’t have to absorb this increase as part of their Medicaid budgets.

Lawmakers are already taking action. Just last week, Reps. Kristi Noem (R-SD) and Krysten Sinema (D-AZ) introduced bipartisan legislation to repeal the HIT. Already the bill has 88 cosponsors, and in the past three Congresses identical legislation has garnered a majority of the House as cosponsors. This bipartisan solution is a major step forward that will keep premiums lower and ensure Americans continue to benefit from the coverage they depend on the most.

Marilyn Tavenner is President and CEO of AHIP.