Taxes and Consequences

When health insurance premiums go up, howls of indignation are almost certain to follow.  We’re seeing that in various news stories around the country right now, as likely premium hikes for 2013 are coming into clearer focus.

An article today in Politico, though, makes clear that any finger-pointing directed at health insurers is misplaced.  The Jennifer Haberkorn piece notes that a major factor in premium increases is the Patient Protection and Affordable Care Act (PPACA) or, more specifically, the taxes on health insurance companies that are part of the health reform measure.

PPACA includes a tax on insurers that begins at $8 billion in 2014 and, within four years, increases to $14 billion.  Because many health insurance policies being written this year carry over into 2014, that forthcoming tax is affecting today’s premiums.  In fact, according to a report by the Oliver Wyman consulting firm, the health insurance taxes and fees included in PPACA will increase the costs to cover an individual in the small group market by $2,800 on average.

So, the organizations that will inevitably protest rising health coverage costs and urge state regulators to deny requested rate increases would do well to remember that you can’t have new taxes and fees without also accepting the pricing consequences that invariably come with them.  And, if Congress is concerned about the impact on consumers and small businesses, then lawmakers should revisit the wisdom of paying for health reform with health sector taxes that have a negative impact on the economy.