Slippery Road Ahead
What does a HIT, your health insurance premiums and 2% have in common?
You have heard it an endless number of times, the President refuses to raise taxes on the struggling middle class. I’m betting that we will not see higher “taxes” but that doesn’t mean the middle class won’t pay more no matter what you call it.
The Affordable Care Act includes (among other fees and taxes) a new health insurance tax (HIT) on insurance companies. That tax applies to their insured book of business which means mostly small groups and individuals. This tax raises billions of dollars each year.
But here is the point, these additional taxes will find their way into premiums, the premiums the middle class pays, mostly those who must buy individual coverage and coverage through a small group. The total tax will be $8 billion in 2014 and up to $14.3 billion in 2018. Over the next ten years the tax is expected to exceed $100 billion.
Individuals with good health insurance, privately or through an employer tend to direct their wrath for high premiums at insurance companies (even, based on my experience, when the plan is self-insured). Over recent years this misdirected ire has been heightened by political rhetoric using phrases like, “discriminatory practices, abuse, high salaries, high retention costs” and the ever-present “high profits” and “lack of competition”. All of this is bogus and is not and never has been the cause for high health care costs and the resulting higher premiums.
However, what you should really be concerned about is that rather than make the cost of health insurance better, through the various taxes and fees and the mandates for new coverage and changes in underwriting rules, we have made the cost of health insurance worse for the vast majority of Americans (and their employers … and that is a big concern or should be).
According to America’s Health Insurance Plans website:
“The Congressional Budget Office (CBO) has said that this tax will be “largely passed through to consumers in the form of higher premiums.” A 2011 analysis by Oliver Wyman estimates that this tax “will increase premiums in the insured market on average by 1.9% to 2.3% in 2014,” and by 2023 “will increase premiums 2.8% to 3.7%.”
Impact on individual market consumers: Increase premiums over a ten-year period for single coverage by an average $2,150, and for family coverage an average $5,080.
Impact on small employers: Increase premiums over a ten-year period for single coverage by an average $2,760, and for family coverage an average $6,830.
Impact on large employers: Increase premiums over a ten-year period for single coverage by an average $2,610, and for family coverage an average $7,130.
Impact on Medicare Advantage beneficiaries: Increase costs $16 to $20 per member per month in 2014 and will increase to between $32 and $42 by 2023. The average expected increase in the cost of Medicare Advantage coverage over ten years is $3,590.
Impact on Part D beneficiaries: Increase average premiums by $9 in 2014 and by $20 in 2023 for a total increase of $161 over ten years
Impact on Medicaid managed care beneficiaries: Increase the average costs of Medicaid coverage by about $1,530 per enrollee between 2014 and 2023.
There is talk these days about moderating health care costs based on trends for the last several years. Hope springs eternal, but the reality is that we have a long way to go to change the health care delivery system. In the meantime there are numerous new cost drivers added to the system, to insurance companies and to employers that will add to the cost of health insurance.