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Health Tax Hammers Small Business

A prominent member of the agriculture community wants to see part of the so-called Obamacare health care reform package thrown out, saying it will cause undue hardship on small business owners, notably farmers.

The Health Insurance Tax, which targets a health insurance company's net premiums, will likely drive up prices  for individuals and small businesses through increased premiums,  complained New York Farm Bureau President and dairy owner Dean Norton.

Norton, testifying May 9 before the House Small Business Subcommittee on Health and Technology,  said rising insurance premiums has forced businesses to sharply reduce contributions to employee health plans. "We've had to significantly change the cost structure from covering about 90 percent of the insurance cost to approximately 50 percent through a high deductible,'' Norton told the committee. "Unfortunately, the people who are really hurt by this change are the employees. They now have to contribute a larger portion of the expenses when they seek medical attention.''

Beginning in 2014, the health care law imposes a new tax on the health insurance policies that most small businesses purchase.

The financial squeeze on small businesses is palpable, according to a 2012 survey of employer health benefits conducted by the Kaiser Family Foundation. Health insurance costs for small businesses have increased 103 percent since 2000, the survey reported.

The Health Insurance Tax - part of  the Patient Protection and Affordable Care Act, will hike family insurance premiums by $400, or 2.5 percent in 2016, making it even harder for farmers to purchase coverage, according to a report from the Joint Committee on Taxation.

This is why Norton, the New York farmer, supports a bipartisan effort in the U.S. House to repeal the annual fee on health care providers. HR 763, introduced by Reps. Charles Boustany, R-La., and Jim Matheson, D-Utah, would also prevent increases in insurance premiums for individuals and small businesses in the fully insured health insurance marketplace.

Norton told lawmakers most farmers and other small businesses do not self-insure because they do not have a large enough pool of employees, opting instead to purchase health insurance on the fully insured market.

Because the smallest employers rarely self-insure, they'll be hardest hit by the Health Insurance Tax. The Kaiser Family Foundation survey reported that only 15 percent of the smallest employers self-insure.

© 2020 Varnum LLPNational Law Review, Volume III, Number 162


About this Author

Aaron M. Phelps, Varnum, litigation attorney

For over 15 years, Aaron's practice has been focused on complex commercial and environmental litigation - in Michigan and around the country. Aaron has represented clients in contract and corporate governance disputes, telecommunications and energy matters, health care litigation, and tort actions.

Over the last five years, Aaron has represented over 200 companies in lawsuits against Blue Cross Blue Shield of Michigan for ERISA violations. The first trial resulted in a $6 million judgment, and subsequent judgments ranged from $315,000 to over $8 million. Currently...