The Supreme Court’s ruling in favor of the Affordable Care Act last week means that those looking for solutions to their ever-increasing health care premiums now turn their gaze to Congress for solutions.
Given that the big health insurers said this spring that they plan to increase premiums by double digits this year, this is for many Americans a pressing issue, one that the ACA evidently hasn’t fixed.
Congress should start by addressing the Health Insurance Tax, a multibillion-dollar fee on insurance companies that drives up the price of premiums for the rest of us.
These premium increases hurt individuals and business owners, who otherwise would have had more money to spend on goods and raise wages, respectively. Lower-income individuals, whose health care plans are subsidized, still see their portion of their premiums rise, taking a painful bite out of their fixed incomes.
Ironically, it’s the effort to provide subsidized insurance to those below or near the poverty line that is partially responsible for the ongoing health care premium inflation. Insurance companies simply pass the ACA’s taxes, fees and mandates, which subsidize the cost of health care plans for lower-income individuals, on to health care consumers in higher premiums, hurting the very people they’re intended to help.
At $8 billion last year and $14.3 billion by 2018, the Health Insurance Tax is the biggest tax out of about 30 that the ACA created, including those on medical devices and prescription drugs.
The Joint Committee on Taxation estimates that this tax will collect $101.6 billion dollars between 2013 and 2022.
To foot the bill for the tax, health insurers simply make their customers pay for it. This isn’t a big surprise, given that the nonpartisan Congressional Budget Office said back in 2009 that the tax will be “largely passed on to consumers in the form of higher premiums.” Even health insurers themselves have been very upfront about this strategy. Businesses of all types try to pass on the costs of taxes, regulations, and mandates to their consumers.
But in the health care industry it’s is easier to do because consumers are forced to purchase insurance or else pay a fine.
The small businesses that must pay more for their employees’ plans, on the other hand, rarely have such captive customers, which means that they have less leeway to pass along these increased costs.
Instead, small businesses will largely have to try to absorb these increased health insurance costs, adding yet another burdensome, government-imposed cost to their business.
Combined with recent high-profile labor and energy regulations, which also drive up the cost of doing business, it’s no wonder that more American businesses are closing their doors than opening.
An analysis by the actuarial firm Oliver Wyman estimates that the Health Insurance Tax increases premiums for individual plans by $170 a year and increases premiums for businesses by $530 for each family that they cover. The report finds that as a result of these increased costs to businesses, private-sector employment will decrease by 125,000, reducing potential sales at these businesses by about $18 billion.
The tax also contributes to stagnating wages. High-profile commentators and politicians have been highlighting that for some time now, average wages have remained essentially flat after adjusting for inflation.
However, the measures that they reference rarely take into account increased compensation including medical benefits, which has risen dramatically.
In other words, increasing medical premiums are eating your raise.
Fortunately, there is a movement in Congress to repeal this destructive tax. Bipartisan legislation introduced by Reps. Charles Boustany, R-La., and Kyrsten Sinema, D-Ariz., in the House of Representatives and Sens. John Barrasso, R-Wyo., and Orrin Hatch, R-Utah, in the Senate call for its total repeal.
Eliminating the Health Insurance Tax would finally help slow the rate of insurance premium increases, give a needed boost to the economy as a whole and allow policymakers to consider real health care solutions that hold more promise than a simple Supreme Court decision.
