ARTICLE SUMMARY
- State premium taxes increase the cost of employer-sponsored health insurance, with rates varying significantly across the country.
- U.S. Chamber analysis finds premium taxes can add $464 to more than $2,400 per year to the cost of an average family health plan, depending on the state.
- Small businesses can face especially significant costs, making state premium tax policy an important factor in health care affordability and business competitiveness.
Health care affordability remains a challenge for employers across the country, and state policies can add to that challenge. One significant but often overlooked example is the premium taxes states impose on health insurance.
These taxes vary widely from state to state and can add substantially to the cost of employer-sponsored coverage. To help the business community engage with this important part of the health care affordability debate, the U.S. Chamber of Commerce has conducted a comprehensive economic analysis of premium tax burdens across all 50 states and the District of Columbia, and the findings have direct implications for state and local chambers and the employers they represent.
What are premium taxes?
Premium taxes are state-imposed levies on health insurance premiums. States’ approaches to these taxes vary widely. Some exempt health coverage from premium taxes altogether, while others apply rates higher than 10% of total premiums. No matter the amount, these taxes increase the cost of offering coverage, an important consideration as states facing budget shortfalls look for additional sources of revenue.
A U.S. Chamber analysis of KFF data—as well as our own research—quantified the premium tax burden on a state-by-state basis for both small and large employers. Key findings include:
- Premium taxes add $464 to more than $2,400 per year to the cost of an average family health plan, depending on the state.
- State premium tax rates range from under 2% to more than 10% of total premiums.
- For a small employer covering 50 workers, embedded premium taxes can exceed $120,000 annually, a substantial cost that directly competes with investment in wages, hiring, and operations.
- As base premiums rise — individual plans saw average increases of 21% in 2026 — the tax burden grows proportionally, compounding the affordability challenge year over year.
- Because premium taxes are assessed as a percentage of premiums, higher base premiums can also mean a higher tax burden for employers and families.
To access our state-by-state data or discuss how the U.S. Chamber can support your chamber’s engagement on this issue, visit The Hidden Cost of Premium Taxes on Health Insurance | U.S. Chamber of Commerce or contact the U.S. Chamber directly.
Explore: State-by-state analysis of premium taxes on health insurance
Why should state and local chambers be engaged on this Issue?
State and local chambers are uniquely positioned to influence healthcare policies where premium tax decisions are made, at the statehouse.
It is an active legislative threat. Proposals to expand taxes and fees on health coverage are moving through legislatures now. Without an organized business voice engaged, they can advance with little resistance, and the costs land squarely on employers and families.
It affects business competitiveness. Premium tax burdens vary significantly from state to state. High-tax states put employers at a disadvantage, making it harder to offer competitive benefits and to attract and retain talent.
It is a small business issue. Large employers can often self-insure or restructure benefits to manage costs. Small businesses — the majority of most chamber memberships — have far fewer options. A $2,000-per-family tax burden is a direct constraint on what a small business can afford to offer.
It connects to broader workforce and economic development priorities. Employer-provided coverage is a cornerstone of the American benefits system and a key recruitment and retention tool. Eroding its affordability has downstream effects on labor markets and regional economic competitiveness.
Bottom line: the U.S. Chamber is working with state and local chambers to provide data and analysis on premium tax burdens and help inform policy discussions in state capitals. By bringing greater transparency to how these taxes affect employers and employees, the business community can make the case for policies that protect the affordability of employer-provided health coverage.
Explore: learn more about how employer-provided coverage (epc) boosts economic productivity, reduces absenteeism, and strengthens workforce performance.
Learn more: Employer-provided coverage 101
About the authors
Lexi Branson
Lexi Branson serves as Vice President of Health Policy at the U.S. Chamber of Commerce, where she leads the Chamber’s Health Policy Division.
Erin Delaney
Erin Delaney serves as Senior Director, Health Policy at the U.S. Chamber of Commerce.
Grace Williams
Grace Williams is manager of Health Policy at the U.S. Chamber of Commerce, where she plays a key role in shaping and executing the Health Policy team’s advocacy priorities.
Source: www.uschamber.com
