Health Insurance Tax ‘Scares the Daylights’ Out of Some Small-Business Owners

May 12, 2013

Many small-business owners worry that a new tax on insurance providers in the health-care law will mean higher premiums for them, undermining the law’s capacity to lower their health-care costs.

Starting next year, the federal government will charge a new fee on health insurance firms based on the plans they sell to individuals and companies, known as the fully insured market. Meanwhile, the provision exempts health-insurance plans that are set up and operated by businesses themselves (the self-insured market).

Revenue from the tax will help pay for the health-care overhaul, which is expected to extend coverage to millions of uninsured or underinsured Americans.

However, because most large corporations self-insure their workforce, experts warn that insurance companies will pass the costs directly to small businesses. The vast majority purchase coverage in the fully insured market.

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