Obamacare Tax: Bad Medicine (Randy Zook Commentary)

by Arkansas Business Staff  on Monday, Jul. 22, 2013 12:00 am  

Randy Zook

Arkansas is poised for an economic comeback, but a new federal tax tied to Obamacare and targeted at small businesses could soon derail us.

The latest job numbers show that new jobs were created in Arkansas for the second straight month. Our unemployment rate remains below the national average. A big reason for that: Arkansas’ 241,000-plus small businesses, which account for half of all private sector jobs in our state. The Small Business Administration has called small businesses “crucial to the fiscal condition of the state.” Arkansas businesses are working hard to lead our state’s economic revival. We have a ways to go, but we are getting there.

Unfortunately, unless Congress takes action, the federal government will put a job-killing $100 billion obstacle in our way: the health insurance tax.

The health insurance tax is supposed to raise about $100 billion during the next 10 years to help pay for Obamacare. Supporters of the tax call it a tax on health insurance companies. But the reality is that insurers will simply pass the cost of this tax on to their customers. That will burden small businesses, families and Medicare recipients, directly contradicting the stated goal of Obamacare by making health care more expensive and threatening Arkansas’ fragile economy.

Employers’ health care costs will increase because of the tax. And one thing is certain: When employers’ costs go up, jobs are lost. According to a study by the National Federation of Independent Business, the health insurance tax will cost up to 250,000 jobs during the next eight years. Arkansas’ small businesses will account for about 59 percent of the job losses here.

If the tax goes into effect, Arkansas businesses may be forced to find alternative coverage options to avoid higher costs and lost jobs. The main alternative would be to move from fully insured health insurance to self-insured plans, which are not subject to the tax. But most small businesses prefer not to be self-insured because their risk pools are so small that they simply can’t spread the risk in an affordable way. Most small businesses in Arkansas have fewer than 20 employees, according to the Small Business Administration, so self-insurance is not a realistic option for them. Plus, if more businesses do self-insure, that merely shifts the tax burden to the smallest employers and to individuals, further exacerbating the cost issues for Arkansas businesses and families.

And families already face higher costs from the health insurance tax, with premium increases of about $5,000 during the next 10 years. That hit to consumer wallets will mean less money flowing into our state economy.

The good news is that Congress is listening. Bipartisan legislation in the U.S. House of Representatives has 222 co-sponsors — enough to pass. I applaud all four members of Arkansas’ House delegation for supporting the bill. Now we need the Senate to act. I urge Sens. Mark Pryor and John Boozman to join their House colleagues in the fight against the health insurance tax.

The health insurance tax is the wrong tax at the wrong time. Congress needs to repeal it so that Arkansas can get back to work and so Arkansans can afford health coverage.

Randy Zook is the president and CEO of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas. He can be contacted at RZook@ArkansasStateChamber.com.



Please read our comments policy before commenting.