I recently heard someone say that they expected Obamacare to give them comprehensive coverage and an affordable premium. Those competing goals may be worthy, but the combination is quite impossible. We have already discussed the insurance market reforms, new benefit mandates and essential health benefits for exchange coverage that will add to the cost of health care coverage.
However, there is much more. The fees and taxes imposed on the health insurance and health care industry will add to the cost of providing coverage and health care … and that means those costs will find their way into premiums.
All this is like squeezing a balloon, squeeze one side and the other expands. In the aggregate Obamacare cuts payments to health care providers under Medicare, lowers payments to Medicare Advantage Plans, eliminates tax benefits for employers, limits requested insurance premium increases, adds new fees and taxes on insurers and on the health care industry, limits use of flexible spending accounts and HSAs and requires employer plans to subsidize health insurance exchanges. All this while adding many new required benefits to both Medicare and private insurance including “free” benefits.
Beginning in 2011, the law imposed a fee of $27 billion over ten years on drug manufacturers and importers based on their share of “covered” sales to government purchasers. Companies will pay the fee by September 30 of each year. The fee is not deductible for tax purposes.
Beginning in 2014, the law imposes a fee on health insurance companies based on the value of net premiums for policies sold in the United States. Estimates are for $60.1 billion in revenues over 10 years as a result of the provision.
The law imposes a 2.3% tax on sales of medical devices after 2012. The tax does not apply to eyeglasses, contact lenses, hearing aids, and devices sold at retail establishments for individual use. Joint Committee on Taxation estimates $20 billion in revenues over 10 years from this provision.
Insurers offering their coverage through a federally facilitated health insurance exchange will be charged a fee to do so. The HHS rule proposes a per billable member user fee.
Group insurance plans will be charged $63.00 per plan participant for at least three years beginning in 2014 to subsidize the exchanges.
The quest for “affordable” health care goes on. Too date we have deluded ourselves into thinking the affordable part comes from federal subsidies (which is the primary purpose of all the above fees and taxes) for people using health insurance exchanges. Or, that adding free, unlimited coverage does not impact premiums. Nothing could be further from the truth!
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