Obamacare's Hidden Tax on Your Health Insurance

On November 29, as most
Americans staggered through a tryptophan-induced haze, the federal
government published
final rules (PDF) for the Health Insurance Providers Fee—or
Health Insurance Tax, to be more honest. It’s a strange fee; one
for which the amount to be collected is predetermined, and then
parceled out among each “covered entity” that charges premiums for
health coverage, proportionate to the insurer’s share of net
premiums. Which is to say, it’s a tax that hits individuals, and
small-to-medium-sized businesses that have to pool risks, but
explicitly excludes the sort of “self-insured plan” offered by
large employers. Unless you work for a large company that
self-insures, you can expect the fee to be passed on and to add a
couple of percent to the cost of your health coverage.

How much the tax will add to your bill is a bit
of a guessing game, since the government has already decided how
much it will collect, but the size of the market is a bit up in the
air in the age of crashing government Websites and legally required
policy cancellations. Buried on page 832 (yes, really) of the
Patient
Protection and Affordable Care Act (PDF) is Section 9010(e),
which announces, bluntly, that the IRS will collect:

• $8 billion in 2014
• $11.3 billion in 2015
• $11.3 billion in 2016
• $13.9 billion in 2017
• $14.3 billion in 2018

After that, “the applicable amount shall be the applicable
amount for the preceding calendar year increased by the rate of
premium growth.”

It’s good to have confidence in how much revenue you’ll collect,
isn’t it? I’ll bet the health insurance providers who will be
passing this tax on to their customers wish they had the same
confidence.

In fact, the new tax is enough of a concern that insurers, like
Aetna, are
distributing brochures (PDF) explaining why premiums are
subject to a somewhat unpredictable new levy. “Because the new
federal fee will impact the cost of plans going forward,” cautions
Aetna, “we feel it’s important for you to understand this fee. By
doing so, you can better anticipate and plan for the expected
impacts.”

How much will the new tax add to the average health coverage
bill? The Heritage Foundation’s David R. Burton
says it “will increase individual and small group health
insurance premiums by an additional 2–3 percent.”

Douglas Holtz-Eakin, president of the American Action Forum and
former director of the Congressional Budget Office, performed

detailed calculations of the costs Obamacare is likely to inflict
on health care, and
predicts the “anticipated impact is as much as 3 percent or
nearly $5,000 per family over a decade.”

When the Obama administration promised us cost control on health
care, we should have realized that meant upwards.