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11
Dec

5 Taxes to Increase Health Premiums

Written by dreilly. Posted in Blog, education, health care reform, PPACA, premium costs

You might think the goal of health reform is to make healthcare more affordable.  The bill after all is called the Patient Protection and Affordable Care Act.  

Well the truth is this.  Affordability is a key component.  But sadly for many of us who already have health insurance, we won’t reap the benefit of lower costs.  Premiums will rise for many of us to offset the massive costs of federal subsidies designed to help the uninsured, as well as many currently insured, pay for coverage.   But subsidies must be paid for. 

Back in 2009 when the politic debate raged over the legislation, Congress and the Administration realized the public would never support sweeping taxes on individuals to finance the bill.  So instead they raised taxes on the large healthcare corporations that, they argued, could more easily absorb the costs.  

Well, let’s take a look at a few financing mechanisms that begin between in 2013 and 2014 and consider how these requirements will assist in the goal of affordability.   

1)      Big Pharma will be required to kick in between $2.3 to $4.8 billion from the profits they receive from selling brand name prescriptions.  Let us not forget that U.S. pharmacy companies reap the benefit of U.S. laws that allow them to sell the same drugs to U.S. citizens at costs far above the costs they sell to citizens of other countries.  One can certainly argue they should pay the price for those protections.  However, the simple truth is that higher taxes on pharmaceuticals results in higher costs to health insurance carriers that pay claims.  Premiums will rise to cover.

2)      Medical device manufacturers will be charged a new 2.3% tax on the products they make.  So add 2.3% to the cost for things like crutches, braces, and titanium joint replacements, also items like tongue depressors and latex gloves.  Premiums will rise to cover.

3)      Health insurance companies will be required to pay a new Comparative Effectiveness Research Fee.  This is a relatively inexpensive fee, first payable as of July 2013 that is designed to fund studies to determine which types of procedures and treatments perform better than others.  Insurance carriers will pay just one dollar per participant per year to start.  The fee increases to two dollars per participant in year two and then indexes to medical inflation after that.  The fee is set to expire in 2019.  This of course assumes that a tax intended to end actually ends.  Although relatively inexpensive, it adds cost.  Premiums will rise to cover.

4)      Health insurance companies will be required to pay a new health insurance industry fee.  Fees are estimated to be between 2 to 2.5% of premiums beginning in 2014, rising to 3 to 4% of premiums in later years.   Premiums will rise to cover.

5)      Health insurance companies will be required to pay a reinsurance assessment fee.  This is which is estimated to cost between $60 to $90 per participant per year in 2014, $40 to $60 in 2015, and $25-$35 in 2016.  Premiums will rise to cover.   

Affordability in the Affordable Care Act is going to be tough to achieve.  We’ll have to hope for patient protection.

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