States balk at $15B Obama healthcare 'tax'

A newly unveiled component of President Obama’s healthcare law forcing insurers to pay annual fees is sowing angst in state capitols, where officials view the provision as a $15 billion tax that could disrupt Medicaid programs and other services.

The health insurance providers fee, included in the healthcare reform law over the objections of congressional Republicans, is designed to raise tens of billions of dollars in the coming years.

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In Wisconsin alone, the fee would hit the state’s coffers to the tune of $23 million in 2014, and will likely total more than that in subsequent years, said J.P. Wieske, legislative liaison and public information officer for the state’s Commissioner of Insurance.

The blow to Wisconsin’s private insurance market would be far higher – $3 billion over the next 10 years, Wieske said.

The proposed regulation’s details were published this week, and prompted harsh criticism from the health insurance industry, which warns that the fees would ultimately raise the price of healthcare. The Obama administration has countered that the insurer fee is just one of many provisions, which, taken together, would drive costs down.

But in states that participate in Medicaid managed care plans, the fee would be painful. One study commissioned by the Medicaid Health Plans of America found that states would be on the hook for $15 billion over the next ten years.

“That’s dangerous,” said Bruce Greenstein, Louisiana’s health secretary. “I have deep concerns.”

Greenstein said the fee is tantamount to discrimination, since some plans – including those offered by certain nonprofit healthcare providers – are exempt from the fee.

Administration officials did not imemditaely respond to requests for comment on the concern from states.

Nationwide, fees assessed on non-exempt insurers would total $8 billion next year and rise thereafter, eclipsing $14 billion in 2018, according to the Internal Revenue Service, which drafted the proposed rule. The fees would vary in size, depending on a firm’s net premiums, and would come due by Sept. 30 every year.

In Wisconsin, some smaller private insurers were considering changing their business model to nonprofit status because of the added costs, Wieske said.

For states offering Medicaid managed care, however, that is not an option.

Ultimately, the fee will raise the costs of Medicaid programs, which are funded by a combination of federal and state money, said Joe Moser, executive director for Medicaid Health Plans of America (MHPA).

The trade group opposes the fee in general and is pressing for its repeal. Short of that, Moser said, MHPA would support changes that exempt Medicaid. from the provision.

During consideration of the Affordable Care Act, congressional Republicans fought unsuccessfully to scrap the fees. Another attempt to do away with them is now under way in the House, where Reps. Charles Boustany Jr. (R-La.) and Jim Matheson (D-Utah) are pressing a bill to repeal the provision.

Even if the House were to pass the bill, it would have a tough road forward in the Senate and would likely face a veto from Obama.

Opponents, meanwhile, are trying to build their case against the fee. Already, the fee is a top issue for health insurers who contract with states, said Jonathan Dinesman, vice president of government relations for Centene Corporation, a managed care company based in St. Louis.

“This fee will discourage states from enrolling more people,” he said. “It contradicts the objectives of the ACA.”

Dinesman said Centene was still analyzing the language of the proposed rule. Beyond legislation to block or repeal the fee, opponents can submit public comments on the proposal for the next three months and otherwise seek to influence its language during the rulemaking process.

“Everything’s on the table,” he said.

This story was updated at 12:15 p.m.