Health insurers won a victory in 2015 when a tax that was part of the Affordable Care Act was suspended. Now as they fight to repeal or delay the tax again before it comes back into effect, the odds don’t seem to be in their favor.
Insurers, businesses and conservative groups are scrambling for ways to at least delay the health-insurance tax, or HIT, following the collapse of health-care legislation in July. They seemed poised for victory just a few months ago, when the health-insurance fee, and most of the other levies enacted to help fund Obamacare, were targeted in repeal bills passed by House Republicans and considered by Senate Republicans.
The health-insurance tax, which is scheduled to go back into effect in December, is an annual fee owed by insurers such as Anthem Inc., UnitedHealth Group Inc. and Aetna Inc. that varies based on their share of net premiums written nationally — the aggregate amount owed would total $14.3 billion in 2018. Those opposed to the tax are trying to pitch the message that repealing it could prevent higher premium costs for consumers.
The HIT took effect in 2014, but an omnibus bill passed at the end of 2015 temporarily suspended it starting last year.
With a full Obamacare repeal stalled, one option for HIT opponents is to push for including its repeal or delay in broader legislation to overhaul the U.S. tax code, according to three people familiar with the effort. An alternative would be to add the provision to a continuing resolution to fund the government, said the people, who asked not to be named because they weren’t authorized to speak publicly. Both options face considerable opposition.
“There’s broad agreement in Washington that we need urgent, bipartisan solutions to improve health-care affordability,” said Elena Tompkins, executive director of Stop the HIT, a coalition of industry groups and small business associations that wants to repeal the tax. “It’s why we need Congress to act now and provide immediate relief from the health-insurance tax.”
Tompkins said Congress needs to take action as soon as possible since insurance companies lock in premiums for the individual insurance exchanges in September. She said the group is considering all legislative options.
Three dozen conservative groups and activists including Americans for Tax Reform urged House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell to repeal or delay the HIT and Obamacare’s medical-device tax, to avoid “higher premiums and higher costs for middle class families, seniors, and small businesses,” the groups said in a letter dated Aug. 10. The health-insurance tax will increase premiums by $5,000 per family over the next decade, the letter said, citing research from the American Action Forum.
Ryan has signaled openness to eliminating another Obamacare levy — a 3.8 percent net investment income tax on top earners — as part of a tax overhaul but he’s been firm so far on the health-insurance tax. The difference is that the investment tax affects “capital income” and might slow the economic growth that he and other Republicans have pledged to deliver, Ryan said. “Other taxes that affect health care, like the HIT tax and those taxes, those we see as part of Obamacare,” he said.
Ryan’s reluctance may be related to making Congress’s tax-math work. The health-insurance tax is estimated to raise $145 billion over a decade, according to the Congressional Budget Office. That revenue loss would further complicate efforts to keep any tax changes from adding to the long-term federal deficit. Republican leaders need to achieve that goal in order to use a budget procedure that allows them to bypass Democratic opposition in the Senate.
“If you’re going to cut the corporate tax rate, somebody’s got to pay for it,” said Don Williamson, the executive director of the Kogod Tax Policy Center at American University.
A spokeswoman for Ryan didn’t respond to requests for comment. Lauren Aronson, a spokeswoman for the tax-writing House Ways and Means Committee said in an email that Chairman Kevin Brady still “believes the best way to get the Obamacare taxes out of the economy is through health-care reform legislation.”
The industry may also lobby for adding a repeal or delay of the HIT into a continuing resolution, which would fund the government after September if a formal budget hasn’t been approved, as appears likely. A continuing resolution would need Democratic support, since it requires 60 votes to pass in the Senate.
Since the tax provision is estimated to lose revenue, it would have to be offset with cuts to mandatory programs like Social Security or Medicaid under budget rules, according to Bill Hoagland, senior vice president at the Bipartisan Policy Center. That’s unlikely to get any endorsement from Democrats, Hoagland said.
Lawmakers could also look to the reauthorization of the Children’s Health Insurance Program funding bill as a possible vehicle for repealing parts of Obamacare, Sen. John Cornyn of Texas, the No. 2 Republican, told Bloomberg BNA.
Congress needs to resolve other pressing issues before year’s end, including raising the debt-limit. “It is going to be just fiscal mania all fall,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for decreasing the deficit.
As for repealing or delaying the HIT, she said: “I can certainly see this not happening.”
Even a standalone HIT repeal bill that has 155 cosponsors in the House could run into problems with timing given the packed legislative calendar, she said.
The industry trade group America’s Health Insurance Plans estimates that reinstating the tax would increase premiums by as much as 3 percent. It also said that the HIT costs employees of small business $210 annually and $530 for families.
Insurance companies including Anthem, UnitedHealth and Aetna lobbied on the tax in the second quarter, according to disclosures. Aetna spent almost $1.4 million on lobbying on all issues during the quarter, filings show.
The Chamber of Commerce, which is often the highest-spending lobbying group in Washington, also urged Congress on Aug. 3 to delay the tax again as part of an effort to stabilize insurance markets.
Though the effort faces difficulties, if the industry were able to get the HIT moratorium reinstated, companies including Anthem, UnitedHealth and Cigna Corp. could see analysts’ estimates of their income growth jump, said Ana Gupte, a senior analyst at Leerink Partners, who covers health-insurance companies. Additional percentage growth in the “mid-single to as much as teens” range might be plausible, she said.
Gupte said insurers are assuming the tax will return, but they’ll still try to do everything they can to fight it.
“It is their top issue, and regardless of their mix of business they have something at stake here,” she said.