Health Care Law’s Hidden HIT On Businesses

By: Bernie Marcus

Appeared in Wall Street Journal on April 2, 2014


The ACA's insurance-company fee will raise premiums and kill 146,000 jobs.

President Obama’s promise that Americans could keep their health insurance if they liked it was the most infamous of the Affordable Care Act’s sketchy sales pitches. But many of the law’s most damaging aspects are less known, buried in thousands of pages of regulations.

Consider the “fee”—really a hidden sales tax—that all health-insurance companies have been forced to pay since the first of this year on premiums for policies sold to individuals and small and medium-size businesses. The health-insurance tax—known as HIT in business circles—is expected to generate revenues of about $8 billion this year and as much as $14.3 billion by 2018, according to the legislation.

The Congressional Budget Office and the Joint Committee on Taxation predict that insurance companies will pass the cost on to customers, as any company subject to such a tax would. In other words, millions of Americans lucky enough to keep their current health insurance under ObamaCare will be paying much higher premiums because of this tax, with the added cost rippling through the economy and stifling job creation.

The National Federation of Independent Businesses projects the health-insurance tax will add an additional $475 per year for the average individually purchased family policy—nearly $5,000 over the course of a decade. Small businesses will take an even bigger hit, with the cost of an employer-provided family policy rising a projected $6,800 in the next decade.

Since most large companies self-insure, they aren’t affected by the new tax. But smaller- and medium-size businesses don’t have that luxury and will bear the brunt of the tax. Many will be forced to raise their employees’ share of premium payments or, worse, lay off workers to pay the escalating costs of health care for their core employees.

The NFIB projects private-sector employment through 2022 will be reduced by at least 146,000 jobs because of the health-insurance tax, and perhaps as much as 262,000 jobs. That’s like vaporizing some of the largest employers in the country. Just the low-end estimate—146,000 jobs—is still more than the total number of employees currently working for companies like Costco, Microsoft and Delta Airlines. 

Sadly, the NFIB predicts that 59% of the reduced job growth will be in small- and medium-size businesses, America’s biggest engines of job creation. Worse, 26% of the problem will be concentrated in very small businesses—the Main Street cafes, retailers and family businesses that are the backbone of the U.S. economy. America’s 28 million small businesses make up 99.7% of all American employers. They also create 63% of new private-sector jobs.

The jobs never created because of the health-insurance tax will be a “death of a thousand cuts” on Main Street that adds up to a major wound for the economy. As a result, NFIB predicts total gross domestic product in 2022 will be $23 billion to $35 billion smaller than it would have been absent the HIT.

To get a handle on what this means, consider that McDonald’s Corp. grossed $27.6 billion last year, selling to 68 million customers per day in 119 countries. So this one new tax on our health insurance is projected to drill a hole in our economy as big as McDonald’s in just eight years, with the overwhelming majority of the damage falling on already struggling small businesses.

According to the Congressional Budget Office, the Affordable Care Act was designed to fix only half the problem of uninsured Americans, by bringing the number of uninsured from 53 million down to 27 million—equal to the current population of Texas. Yet this half-solution has brought with it full-sized problems—like lost health coverage for the previously insured, and job-killing policies like the health-insurance tax.

Poor enrollment figures and endless stories of Americans losing insurance indicate the law won’t even be able to accomplish its incomplete goals. Building a sicker economy will not create healthy Americans. Congress and the president must reform this “reform.”

Mr. Marcus, co-founder and former chairman and CEO of Home Depot, is founder of the Job Creators Network.