There has been endless talk about the need to lower health insurance premiums. It is widely understood that the already high and constantly escalating cost of healthcare is breaking the backs of small businesses and families across California and the rest of the country.
In this strained environment, it is inconceivable that Congress would allow an expensive health insurance tax, known as the HIT, to come back to bite 100 million Americans starting January 1. But that’s exactly what’s set to happen unless Democrats and Republicans can unite and stop it.
The fact is there are few companies with room in the budget for higher healthcare costs, especially when 95% of small businesses say they’ve already seen price increases over the last five years. The HIT tax is a big one, directly adding about $500 per employee per year to premiums. Even for some independent and family-owned businesses, that could mean coming up with $100,000 extra—or more—to cover their workforce.
As someone who cares deeply about the iconic automotive industry in the U.S., I must speak up about the damage this HIT tax will do. While some people think only about Detroit and big auto manufacturers, we’re much more diverse, with deep roots and $33.3B in total economic impact in the Golden State. Much of the automotive supply chain comprises small, niche manufacturers. Then there are independent dealers, repair shops, aftermarket parts producers, supply stores, and a variety of other enterprises employing 239,719 workers in the state that help Americans purchase, maintain, customize, and enjoy their cars and trucks.
These companies, along with small and mid-sized businesses across nearly every U.S. industry, will suffer if the HIT tax goes back into effect. Their employees will be harmed as well.
The money to cover the HIT’s costs has to come from somewhere. At most businesses, the easy compromises were made after the last premium increase, or the one before that, or the one before that. Many companies have slashed discretionary spending and are now looking hard at whether they can hire more workers or give the raise their employees deserve. They’re deciding whether they can invest in the latest CAD software or the lathe they really need.
When company owners decide that these costs aren’t in the budget, it will have ripple effects. As one business cuts back, their vendors and suppliers are hurt, and they have to cut back, too. That’s why an Oliver Wyman study predicts up to 286,000 job losses from this HIT tax.
The saddest part will be the impact on families. Inevitably, some employers will drop health insurance because of the HIT tax, and that could leave parents and children hanging, wondering how they will afford healthcare on their own. Other companies will pass along more of the healthcare costs to employees; select a skimpier health plan with less coverage and higher out-of-pocket expenses, or both. Any of these choices will eat into the money middle class Americans have at their disposal to make ends meet.
There’s no reason for all of this pain. Congress put off the HIT tax before, when 400 Republicans and Democrats came together to respond to their constituents’ concerns. Before the 2017 moratorium ends, they can pass another bill to give us all a break. But they’ve got to do it soon, or else businesses will soon be locked in with premiums that include the HIT tax costs.
California’s elected officials in Washington, including Rep. Jeff Denham, should make a HIT tax delay a top priority as soon as they get back to DC in September. Few other improvements to the healthcare landscape are likely this year, so it’s not fair to heap on a big tax if Congress can’t bring costs down elsewhere. They should leave things as they are, with no HIT in effect, so businesses and families have a better chance of keeping up financially and keeping their healthcare.
Bill Hanvey is the President and CEO of the Auto Care Association, the national voice of the $368 billion-plus auto care industry that provides advocacy, educational, networking, technology, market intelligence and communications resources to serve the collective interests of its members.