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Repealing the Health Insurance Tax Would Add to Deficit, Undermine Health Reform

Congress enacted a tax on health insurance providers in 2010 as one way to help pay for health reform (the Affordable Care Act, or ACA).  Now, bills introduced in the House and Senate would repeal the tax — a move that would add to the deficit and undermine health reform, as we explain in a new paper.  Here’s an excerpt:

The tax is one of a set of measures to expand health insurance coverage and slow the growth of health care costs without adding to the budget deficit.  Health reform will strengthen our nation’s economy and, according to the Congressional Budget Office, slightly reduce premiums for employer-sponsored health insurance in the near term.

Repealing the tax on health insurers would cost about $116 billion over the 2014-2023 period and undercut health reform in at least two ways.  “Pay-as-you-go” rules would require Congress to offset the cost of repeal by raising other taxes or reducing spending; one likely target would be provisions of the ACA that expand health coverage to 25 million more Americans.  In addition, repealing the tax would encourage efforts to repeal other revenue-raising provisions of the ACA, which in turn would require still more painful offsets or increase the budget deficit if Congress failed to offset the cost.

The tax on health insurers is a small price to pay for helping to extend health coverage to millions more Americans without increasing the deficit.

Click here to read the full paper.