Health Insurance Tax Will Add to Premiums

Health insurance premiums will rise when a new tax kicks in, a new study predicts.

• The research firm Oliver Wyman has analyzed the cost implications of the health insurance tax.
•  The new tax on health plans starts in 2014. This report finds it will cause health premium costs to rise by about $7,200 on average for families over the decade.
• The tax is supposed to fund the health reform law’s various parts. But the practical effect will be to drive up health coverage costs for consumers.

The stated goal of the health reform law is making health coverage affordable and accessible. But higher premiums work against that purpose.

• The health insurance tax is one of several health taxes that will take effect over the next few years, raising health costs. Each new tax will ultimately be passed along.
• In 2014, a sales tax on health insurance will add $8 billion to the cost of health coverage. The tax bite by 2018 will reach $14.3 billion. It will rise higher and higher from there.
• The ones who will end up paying more than they would have for health insurance include small businesses, Medicare Advantage beneficiaries, people who buy their own insurance and Medicaid managed care.
• The Joint Committee on Taxation has estimated that the insurance tax will collect more than $100 billion over 10 years. That represents premium costs 2 percent to 2.5 percent higher than they would have been otherwise.
• The Congressional Budget Office recently said the coming taxes on health insurers and medical device companies “would be largely passed through to consumers in the form of higher premiums for private coverage.”

The insurance tax will hit different groups hardest in different states, depending on what part of the health insurance market they’re in. New York appears on all of the study’s top-five lists.

•  Families in the individual policy market will pay the most extra costs in New York ($9,942 over 10 years), Massachusetts ($9,937), Rhode Island ($8,308), Connecticut ($6,339) and New Hampshire ($5,736).
•  Small businesses will get slammed with higher insurance costs because of this tax, especially in West Virginia (an extra $9,221 over a decade), New York ($9,046), New Hampshire ($8,555), Nebraska ($7,995) and Massachusetts ($7,895).
• Seniors in Medicare Advantage plans will pay the most extra in New Jersey ($4,182 over 10 years), Florida ($4,181), Louisiana ($4,111), New York ($4,074) and Texas ($4,033).
• The top five states for average extra health insurance taxes on Medicaid managed care programs are the District of Columbia ($2,518 over 10 years), New York ($2,466), Rhode Island ($2,360), New Jersey ($2,276) and Minnesota ($2,257).

Health leaders support expanding coverage to the uninsured. We support improving affordability of healthcare for families and individuals. However, as the Oliver Wyman report, commissioned by America’s Health Insurance Plans, is merely the latest to show, punitive taxes that burden healthcare sectors such as insurance and manufacturers aren’t “free money.” Somebody will pay the extra costs. As it turns out, it’s ultimately patients and healthcare consumers.