Criticism is swift–and harsh
By 3/1/2013  BenefitsPro

The Internal Revenue Service on Friday unveiled its proposal to
raise billions of dollars through annual fees on health insurers, a
“$100 billion health insurance tax rule” that the industry says will
significantly drive up costs for consumers. 

The rule as part of the Patient Protection and Affordable Care Act
imposes annual fees on health insurers that start at $8 billion in 2014,
increases to $14.3 billion in 2018, and will increase every year after
that. The Joint Committee on Taxation estimates the tax will exceed $100
billion over the next ten years.

The proposed rule will be published Monday for public consideration in the Federal Register. The IRS will accept comments for 90 days, beginning Monday.

Not paying on time will result in a $10,000 penalty for insurers, plus $1,000 for every day they miss deadline.

America’s Health Insurance Plans blasted the rule as a tax that will
financially drown both employers and consumers. They warn that the costs
will have to be passed along to consumers in the form of higher
premiums, a claim that the Congressional Budget Office has also verified
in its analysis.

“Imposing a new sales tax on health insurance will add a financial
burden on families and employers at a time when they can least afford
it,” AHIP President and CEO Karen Ignagni said Friday. “This tax alone
will mean that next year an individual purchasing coverage on his or her
own will pay $110 in higher premiums, small businesses will pay an
additional $360 for each family they cover, seniors enrolled in Medicare
Advantage will face $220 in reduced benefits and higher out-of-pocket
costs, and state Medicaid managed care plans will incur an additional
$80 in costs for each person enrolled.”

There is currently legislation to repeal the fees, recently
introduced by Reps. Charles Boustany, R-La., and Jim Matheson, D-Utah,
which AHIP strongly supports.

A 2011 report by Oliver Wyman found that nationally the health
insurance tax alone “will increase premiums in the insured market on
average by 1.9 percent to 2.3 percent in 2014,” and by 2023 “will
increase premiums 2.8 percent to 3.7 percent.”

Families purchasing coverage in the individual market will be hit the
hardest in New York while those getting coverage from a small employer
will be most impacted in West Virginia, Oliver Wyman analysis also
found. Medicare Advantage beneficiaries in New Jersey and the Medicaid
managed care program in Washington, DC top their respective lists of
those that will be hardest hit by the tax