Health Care Committee Update
December 2, 2013

Staff Contact: Lev Ginsburg

Final IRS HIT Tax Rules Adopted

On November 29, 2013 the Federal Department of Treasury published the final rule on the Health Insurance Providers Fee, 26 CFR 57, effective the same day.  The rule imposes an annual fee, beginning in 2014, on each covered entity engaged in the business of providing health insurance, which means that starting on January 1, health insurance companies must pay a new tax on the benefits they provide to individuals, families, small and mid-size employers, beneficiaries in Medicare Advantage and state Medicaid managed care programs. This Health Insurers Tax (HIT) is price tagged at $8 billion in 2014 and rises to $14.3 billion in 2018.  For the average family, the tax will add $270 in premium in 2014, $400 in 2016 and $5,080 over the next decade. 

Some of the more problematic issues of the tax are that revenue raised by the tax does not even directly fund new health care benefits but instead goes into the general treasury.  Additionally, small businesses will pay a disproportionate share of these taxes since these employers are far more likely to purchase insurance rather than self-insure. 

The Business Council has supported H.R. 3367, bipartisan legislation that would delay the new health insurance tax for two years. Also, bipartisan legislation, H.R. 763, which would fully repeal the tax, currently has 229 co-sponsors.