CalChamber Seeks to Prevent Increases in Employer Health Care Premiums

The California Chamber of Commerce has asked congressional leaders to repeal a tax on health insurers that drives up costs for responsible employers.

In a letter to House Majority Leader Kevin McCarthy (R-Bakersfield) and Minority Leader Nancy Pelosi (D-San Francisco), the CalChamber points out that the health insurance tax on health insurance providers is essentially an indirect tax on responsible employers because the tax is calculated on insurance premiums paid for by employers.

The tax on health insurers was included in the Affordable Care Act (ACA) and was set at $8 billion in 2014, increasing to $14.3 billion in 2018.

In California, almost 18 million individuals—more than 45% of the state’s population—receive employer-sponsored health insurance coverage. For the United States as a whole, approximately half of all health insurance is through employer-sponsored coverage.

For health insurance providers, the health insurance tax is calculated on the entity’s net premiums and is not deductible. Providers who increase premiums to recoup the tax must raise premiums by an amount greater than the tax itself because the additional premium increase is considered taxable income. The increased cost is passed along to businesses, small and large.

With the continuing increase in health care premiums paid by employers and the announcement in August that premiums for health care plans purchased through the state’s insurance marketplace, Covered California, will rise by an average of 12.5%, a delay or repeal of the health insurance tax is more critical than ever.

Potential Increases

Collection of the health insurance tax was suspended for 2017 on a bipartisan vote of Congress. If the tax is not repealed or again delayed, large California employers and their employees will see health insurance premiums for family coverage increase by $560 in 2018, while small California businesses and their employees will see premiums for family coverage increase by $467.

The CalChamber urges Congress to repeal the health insurance tax, and if more time is needed for a repeal, to at least delay the tax to ensure that responsible employers and their employees are not penalized by further increases in health insurance premiums.

Staff Contact: Karen Sarkissian