ObamaCare imposes a new tax on health insurers of $8.1 billion annually beginning in 2014 and rising to $14.3 billion by 2018. The Congressional Budget Office affirms the general consensus of economists that the new tax “would be largely passed through to consumers in the form of higher premiums for private coverage.” Results from a Ken Kies study suggest that the insurance tax could cost the typical family of four with employment-based coverage as much as $1,000 a year in higher health premiums.
Small businesses and their employees would bear a disproportionate burden. This is because the tax applies only to fully insured health benefits coverage. Self-funded plans, which are the most common type of plan for large employers with 200 or more employees, are exempt from the tax.
What about small business tax credits? The credit is only available for a few years and only to very small firms with relatively low average wages. While the credit could potentially offset some of the ultimate premium burden placed on small businesses, its existence does not alter the economic effects of the insurance tax.