Report sparks fight over health law taxes

A new report commissioned by the insurance industry is sparking intense pushback from health reform proponents because it assumes the law's taxes on health insurance plans will be passed on to consumers.

The Oliver Wyman report estimates that the tax, which starts in 2014, will add up to at least $73 billion in fees through 2019 and increase premiums between 2.8 and 3.7 percent by 2023. The report is likely to spark renewed interest in bipartisan legislation to kill the annual fee, which is assessed based on market share.

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"For small group coverage," the report concludes, "this will on average increase the cost to cover an individual by about $2,800, and a family by about $6,800 over a 10-year period, beginning in 2014."

Rep. Pete Stark (Calif.), the top Democrat on the Ways and Means Health panel, called the report commissioned by America's Health Insurance Plans "just another example of why the health reform law is so vital."

"This new health insurance industry tax — which the industry decries — is levied on them, not consumers," Stark said in a statement. "With their record profits and exorbitant CEO compensation packages, health insurers are perfectly capable of absorbing this cost. However, as AHIP makes clear with their new report, insurers have no intention of doing so. This report is not a knock on health reform, it's yet another knock on the health insurance industry."

The report bolsters what critics have long called a fundamental flaw in the law: Congressional Democrats and the White House determined that the healthcare sector should contribute to its cost because they stand to gain 32 million new paying customers thanks to the law's insurance subsidies and Medicaid expansion. But Republicans warned all along that new fees and taxes would be passed on to customers, increasing costs both for them and for the federal government.

"New fees would be imposed on providers of health insurance and on manufacturers and importers of medical devices," the nonpartisan Congressional Budget Office confirmed in 2009. "Both of those fees would be largely passed through to consumers in the form of higher premiums for private coverage."

Not so fast, insurance industry critics say.

The law also contains a slew of new consumer protections, including a requirement that health plans spend at least 80 percent of premiums on medical care or pay consumers rebates and a rate review provision requiring health plans to publicly justify premium increases of more than 10 percent. Some states also have the power to reject premium hikes, while new health insurance exchanges will enable consumers to compare plans like never before and choose the most competitive options.

"The health insurance companies' relentless pursuit of profit and disregard for people offers another window into how big corporations have abused people and twisted the economy to serve their own interests," Ethan Rome, executive director of the liberal Health Care for America Now, said in a statement. "The public won't stand for this, just as Bank of America customers were unwilling to accept unjustified debit-card fees. No actuary or report can make this look like anything other than unbridled greed."

Legislation to kill the tax was introduced in the House in April by Rep. Charles Boustany Jr. (R-La.), chairman of the Ways and Means oversight panel, and now has 77 co-sponsors, including several conservative Democrats.

The Wyman report concludes that the fee will:

• Affect individuals and smaller firms most of all;

• Further incentivize employers to self-insure their health benefits coverage as a means of avoiding these fees, which will further shift the burden of the fees to smaller employers and individuals who continue to purchase fully insured coverage;

• Increase costs in the Medicare Advantage and Medicare prescription drug programs that will result in increased cost-sharing and premiums for enrollees;

• Increase pressure on state budgets to address increasing costs for Medicaid managed care plans; and

• Exacerbate adverse selection in the individual and small group markets as younger, healthier individuals forgo coverage, "leading to a less stable risk pool and higher premiums."