Many Small Business Owners Worried About Tax on Health Insurers

While the Affordable Care Act was designed to make it easier for all consumers to afford the potentially high cost of health insurance, either on policies obtained on their own or through their employers, some small business owners now worry about the ways in which some tax changes might actually affect premiums going forward.

A new tax on insurance companies that was included in the ACA could lead many of the companies that issue the insurance policies employers rely on as a means of covering all their employees in ways they can afford to start charging far higher rates for the same plans, according to a report from the Washington Post. More concerning is that it will likely be the small businesses and individual buyers that are paying the price for the new tax, because bigger companies will have more bargaining power because of the far larger numbers of people for whom they buy coverage, or because they run their own insurance programs instead.

"Insurers have confirmed back to me that the tax will be passed down to consumers, and the direct impact will be staggering," Ryan Thorn, owner of a small insurance planning firm near Salt Lake City, told lawmakers during a congressional hearing Thursday, according to the newspaper. "It disproportionately hits individuals and small business owners, the people who have been hurt most by these challenging times."

Data from the U.S. Department of Health and Human Services shows that about 75 percent of businesses with between 100 and 500 workers rely on insurance policies bought on the open market, and the same is true of 87 percent of companies with fewer than 100 employees, the report said. On the other hand, just 18 percent of larger companies – with 500 or more workers – do so.

The National Federation of Independent Business, consequently, projected that the new tax could reduce employment in the private sector significantly, cutting as many as hundreds of thousands of jobs over the next several years, the report said.

For this reason, people who run their own companies may want to consider the ways in which they can reduce their small business insurance concerns in other ways, such as finding more affordable workers' compensation or general liability insurance. The ACA mandates that all companies with 50 or more employees working 30-plus hours a week must provide some sort of health insurance options to them, or face a considerable annual fine.