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Report: Health insurance tax will hike premiums

A new report commissioned by America's Health Insurance Plans (AHIP) predicts that payers will pass the cost of a new insurance tax onto their customers by increasing premiums.

The tax, which will be imposed on insurers beginning in 2014 to help defray the cost of expanding coverage to uninsured Americans, could increase premiums by about 2 percent in 2014, and 3 to 4 percent by 2023, according to the National Journal. That amounts to at least $73 billion in fees through 2019.

"Those individuals and families who are not eligible for [government] subsidies ... will bear the full cost of the fees, requiring that they pay more out-of-pocket and making coverage less affordable," consulting firm Oliver Wyman wrote in its report for AHIP.

The report also concluded that the federal tax would primarily affect individuals and smaller firms; further incentivize employers to self-insure their benefits coverage to avoid these fees; and increase costs in the Medicare Advantage and Medicare prescription drug programs, leading to increased cost-sharing and premiums. The taxes also could will lead younger, healthier individuals to forgo health coverage, which resulting in a less stable risk pool and higher premiums, reports The Hill's Healthwatch.

However, regulators dismissed these conclusions as "fundamentally flawed" because the report only examines one provision of the 2010 reform law while ignoring other provisions that lower costs and boost transparency, Bloomberg notes.

"When reform is fully implemented, insurance companies will have 24 million new customers," Erin Shields, a Department of Health & Human Services spokeswoman, told Bloomberg. "But this report assumes this provision of the law is passed on full to the purchasers of insurance. If insurance companies insist on sticking consumers with bigger bills while their profits rise, they will be required to justify their actions to the public."

To learn more:
- read the Oliver Wyman report (.pdf)
- see the The Hill's Healthwatch article
- check out the National Journal article
- read the Bloomberg article

Related Articles:
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Insurance giants cut lobbying but still spend $2.7M
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