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District of Columbia Implements 1 Percent Tax on all Health Care Carriers

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By Katie Vlietstra


In early May 2014, the District of Columbia (DC) City Council unanimously supported PR20-0744 — Health Benefit Exchange Authority Financial Sustainability Emergency Declaration Resolution of 2014, enacting a 1 percent tax on all health-insurance carriers with gross receipts of $50,000 or more within the District of Columbia.

Since the passage of the Affordable Care Act (ACA), the NASE has proactively engaged in its implementation in order to ensure that our members — and the millions of self-employed and micro-businesses nationwide — have access to comprehensive and affordable health care coverage. However, we believe the decision by the DC City Council is counterproductive and ultimately hurts those individuals who would benefit the most from being able to access comprehensive and affordable health care coverage.

The request by the DC Health Benefit Exchange Authority for the city to find revenue to ensure the solvency of the Exchange undermines the purpose of the state-based exchange model. On several occasions the NASE, along with many other organizations, expressed concern to District and Exchange officials that the city did not have the demographics to support a state-based exchange. This fact became evident when the Exchange Authority put forth rules (which received approval from the DC City Council) that would require every DC-based small business with 50 or fewer employees to purchase their health care in the Exchange.

NASE does not believe it is unreasonable to assume this 1 percent tax on health-insurance carriers will be immediately tacked on to the premium costs paid by the policyholder. Given the estimated fluid nature of the health insurance premium marketplace and continued concerns and efforts by the self-employed and micro-business community to contain costs, this additional tax is unwelcome and counterproductive to achieving the Authority’s goals.

We also believe that the decision to tax “all health insurance carriers” and not just those operating within the DC Exchange could be in violation of the law and could result in a costly lawsuit that the District of Columbia will have to defend.  

The NASE supports the proactive nature of the Council to be good stewards of the District’s fiscal health while balancing the commitment to the DC Health Benefit Exchange Authority. However, the NASE will hopes that the DC City Council will engage in a thoughtful process to address our concerns and ensure that no business owner is unfairly taxed out of operating within the District of Columbia.

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