All Americans who bought health insurance policies this year – not just those enrolled in Obamacare – face a 41 percent increase in excise taxes because of hidden fees contained in an obscure section of the Affordable Care Act, according to an investigation by The Daily Caller News Foundation.
Virtually everyone who pays for health care insurance this year will be affected by the tax. The little-known tax was imposed on all consumers regardless of whether they obtained their insurance through Obamacare or through their employer or as individuals in the private market.
This year the tax will cost individuals more than $500 in extra premiums according to one actuarial estimate. Families who purchased insurance will see their premiums go up by more than $700.
The new tax also hits senior citizens who rely on Medicare Part D and Medicare Advantage. It will land on the nation’s poor who depend upon Medicaid-managed care programs.
The 41 percent sticker shock increase doesn’t stop in 2015, however. Over the next four years, the statutorily mandated Obamacare fees are expected to double again.
Over the next decade, consumers will pay more than $145 billion for the tax, according to the Congressional Budget Office. The levy will continue to go up each and every year into the future.
The tax was buried by congressional authors in section 9010 of the law and was envisioned as a way to raise future funds to pay for Obamacare.
The Obamacare fees were designed by the program’s authors to be delayed, kicking in only in 2014 at $8 billion and mushrooming into a $14.3 billion annual price tag on insurance policies by 2018.
Republican Sen. John Barrasso, who favors repeal of section 9010, said the tax “is another example of how the president’s health care law was designed so the most painful parts of the law kick in years later.”
CBO reported the fee was a “statutorily fixed” amount that must be collected each year from consumers, as opposed to a percentage rate.
The statute describes the levy is an “annual fee” but health-care economists say it has been commonly referred to as an excise tax.
The Joint Committee on Taxation said the Obamacare tax was “similar to an excise tax based on the sales price of health insurance contracts.”
The panel predicted the fee on insurance policies would be borne by consumers. The panel also told then-Sen. Jon Kyl in a June 2011 letter that, “an excise tax generally is borne by consumers in the form of higher prices.”
An actuarial review of the Section 9010 by the management firm Oliver Wyman for the health insurance industry predicted that individual policyholders will pay $514 more this year due to the Obamacare tax.
Those who use small group policies will see a rise of $688, while family coverage would rise by $719, the firm stated.
Ironically, the elderly and the poor — those who were supposed to benefit most from Obamacare — will be adversely affected by the new tax, as will financially hard-pressed state governments.
Section 9010 mandates that taxes must be paid for seniors who rely on Medicare Advantage and Medicare Part D.
Oliver Wyman estimated Medicare Advantage would cost seniors $360 more this year. Medicaid managed-care enrollees will be expected to face increases of $152, according to the firm.
Milliman, the national health actuarial firm, reported in 2014 that states will lose 52 cents for every dollar they receive from Medicaid because of the fee.
“The result is a transfer of $0.52 from state government to the federal government for every $1.00 of ACA health insurer fee,” the accounting firm said.
Milliman further said the Obamacare tax will cost states 1.8 percent to 2.8 percent more for Medicaid managed care, which is a low-cost way to offer medical services to the poor. Half of the nation’s Medicaid recipients are signed up by the states under Medicaid managed care, according to Milliman.
This fee, while seemingly low, can put many Medicare-managed care companies at great financial risk or perhaps out of business.
“Given Medicaid managed care profit margins were less than 2% in CY 2012, increases of this magnitude are meaningful,” Milliman said.
The actuarial firm estimated the Obamacare tax will cause the states that use Medicaid-managed care losses of up to $13.9 billion.
For years the health insurance industry has battled but failed to persuade Congress or the president to repeal the tax.
Earlier this year, Republican Sen. Orrin Hatch and Barrasso introduced legislation to repeal the excise tax. It has 38 Republican co-sponsors. No Democrats have backed the bill to date.
Hatch described the tax as “yet another hidden health care tax arbitrarily created to pay for Obamacare.”
Republican Rep. Charles W. Boustany introduced legislation in the House to repeal Section 9010. He has claimed bipartisan support among the 218 co-sponsors, a majority of the House.
The only group exempted from the tax are people who work in large corporations that “self-insure” their workforce. In a self-insurance system, no insurance company is used, only the company assets.
USA Families, a non-profit group that vigorously supports Obamacare, did not respond to a TheDCNF request for comment on the tax.