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ObamaCare is likely to cause a heavier burden on small businesses. This comes into force on the beginning of the year 2014.
The tax is on premium paid for health insurance meant for small businesses and individuals.
Significantly, the tax on insurance is more than all taxes together on medical devices and prescription drugs.
The Internal Revenue Service (IRS) collects a flat amount according to rules under Affordable Care Act. The amount thus collected is to be given to insurers according to their market share.
Small businesses with more than 500 employees and union-negotiated health plans are self-insured, and are exempted from this new tax.
In addition, insurance for government entities including Medicare (not Medicare Advantage, which is private). As all this groups are excluded from tax, the burden is entirely on small businesses.
Implications
- According to the Congressional Budget Office, the burden of the new tax is to be borne by consumers to the full extent. Therefore, insurance premiums are likely to rise by the amount of tax. It might be as high as $500 per person covered.
- According to National Federation of Independent Business, 146,000 to 262,000 jobs are to be lost. Of these, 59% are in small businesses.
- It is also likely to press small businesses to suspend financing insurance and send the affected employees to ObamaCare exchanges.