By KENT HOOVER
Washington Bureau Chief

Business groups that don't like health-care reform are chipping away at provisions they don't want, realizing that outright repeal is years away, at best.

They've already succeeded in getting one provision removed. Because of the paperwork burden it would impose on small businesses, Congress last month repealed a requirement that would have forced firms to file a 1099 reform with the Internal Revenue Service any time they spend more than $600 with any other business.

This expansion of the current 1099 requirement, which applies only to payments to unincorporated service providers, was expected to raise revenue by making businesses less likely to hide income from the IRS.

Now about 25 business groups have joined forces in an effort to repeal health-care reform's tax on health insurance companies.

This tax starts at $8 billion a year in 2014 and will rise to $14.3 billion in 2018. Like the 1099 provision, it was included in health-care reform as a way to help pay for the legislation.

Business groups, however, contend insurers will pass the cost of the health insurance tax to their customers. That's something small businesses can't afford, contends the new Stop the HIT Coalition. (HIT stands for health insurance tax.)

"Just like the recently repealed 1099 provision, the HIT is another example of lawmakers hindering job creation ... by passing the cost of the nation's health-care bill onto the backs of small-business owners," said Steve Caldeira, president and CEO of the International Franchise Association, a coalition member.

"For the small-business community, controlling the increasing costs of health insurance premiums has been the top concern for decades," said Dan Danner, president of the National Federation of Independent Business, also a member.

"This new tax will almost entirely be passed from insurers to small businesses and their employees, raising health-care costs and increasing economic uncertainty for this vital sector."

The coalition contends the health insurance tax will cost small-business owners and their employees $87 billion over a decade.

A worker with a family plan will see their take-home pay drop by $5,000 over a decade as a result of the premium increases resulting from the tax, according to the coalition.

At least one small-business group doesn't buy this argument.

The Main Street Alliance, which supported health-care reform, contends new regulations will prevent insurers from simply passing the cost of the tax on to their customers. For example, the Department of Health and Human Services issued a regulation May 19 that subjects health insurance premium hikes of 10 percent or more to state or federal review.

Another regulation will force insurers in the small-group market to provide rebates to their customers if they spend less than 80 percent of their premium dollars on medical care and quality-improvement activities.

Besides, the alliance argues, insurers can afford higher taxes.

"Health insurance companies are reporting the biggest profits in their industry's history," said alliance member David Borris, owner of Hel's Kitchen Catering in Northbrook, Ill.

"This looks like another case of small- business identity theft - hiding behind small-business arguments to defend big insurance profits," Borris said.

The Stop the HIT Coalition, however, contends it is looking after the interests of the small businesses that buy insurance, not the companies that sell it.

"We're not going to support taxes on insurance that our business owners are being mandated to buy," said Amanda Austin, NFIB's director of federal policy.

Health-care reform also raised taxes on medical device manufacturers and pharmaceutical companies. None of these tax hikes makes sense if the goal of the law is to make health insurance more affordable, according to Austin.

Legislation to repeal the health insurance tax has been introduced in both the House and Senate.

The Small Business Health Relief Act, introduced by Sen. Jon Kyl, R-Ariz., would repeal three health-care reform provisions: the health insurance tax, the requirement for employers with 50 or more employees to provide insurance or pay a fee to the government, and restrictions on the use of flexible spending accounts.

Kyl said he remains committed to full repeal of health-care reform, but "the reality is that President Obama will never allow that to happen as long as he's in office."

His bill would at least highlight three parts of health-care reform "that just kill small business," Kyl said.

"Change is in the air," said Bruce Josten, executive vice president of the U.S. Chamber of Commerce, who attended Kyl's rollout of the bill.

Once it becomes clearer how health-care reform is going to affect the insurance marketplace, "anything is possible," Josten said.