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April 9, 2013 > Study predicts job loss in California under new health insurance tax

Study predicts job loss in California under new health insurance tax

Submitted By Michelle Orrock

California may lose more than 26,000 jobs as a result of a little known provision of the new healthcare law called the Health Insurance Tax (HIT). A study released March 28 by the National Federation of Independent Business (NFIB) Research Foundation showed total employment in California will decline by between 14,322 and 26,296 by 2022 because of the increased costs associated with the HIT.

California's overall gross domestic product will also be reduced as a result of the tax. Over the next decade, cumulative lost sales among small businesses will be at least $8.9 billion.

"Businesses in California are struggling under unprecedented costs from taxes and regulations. We need to do all that we can to increase jobs, not reduce them," said John Kabateck, NFIB California director. "This destructive tax simply must go, if we are ever to return to the thriving culture of growth and entrepreneurship that Californians once knew."

The HIT is a new tax in the Patient Protection and Affordable Care Act (PPACA), which, beginning in 2014, will impose over $100 billion in new taxes on the small business community, their employees and the self-employed over a decade. The tax targets the fully-insured market, where many small businesses purchase their health insurance, and will ultimately be passed on to consumers in the form of higher premiums.

Former Congressional Budget Office Director Douglas Holtz-Eakin estimates the HIT will increase premiums on insurance policies purchased in the fully-insured market by $5,000 over the next decade. Eighty-eight percent of small businesses purchase their insurance in the fully-insured market.

Bipartisan legislation to repeal the HIT was introduced in February in the House of Representatives by Reps. Charles Boustany (R-La.) and Jim Matheson (D-Utah), and this month in the Senate by U.S. Senators John Barrasso (R-Wyo.) and Orrin Hatch (R-Utah).

The BSIM (Business Size Impact Module) is a dynamic, multi-region forecasting model that analyzes the impact of policy "shocks" on the economy and is unique in ability among models to forecast the economic impact of such policy on U.S. businesses differentiated by size of the firm. For this purpose, the BSIM adhered to the Small Business Administration definition of "small business" as firms with fewer than 500 employees.

The full report is available here, http://www.nfib.com/hitcost.

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