While everyone has been busy worrying about the “fiscal cliff,” a number of other regulatory and tax changes have gone by relatively unnoticed. Two of these involve the massive new Affordable Care Act regulations, which largely go into force on January 1, 2013.
The first is a $25 billion tax that will be added to all health insurance premiums. The money will be used to fund stabilization subsidies given to insurers to help them cover the costs of insuring people with pre-existing conditions. (As of Jan. 1. 2014, all health insurance is required to be ‘guaranteed issue’ and premiums cannot be up-rated for those with pre-existing conditions.) The tax will be levied for three years – 2013, 1014, and 2015 – and will decrease slightly each year.
Although all insurance policies will be hit with this tax, which works out to roughly $63 per year for 2013, employers that provide their employees with group coverage will end up bearing the brunt of these costs and will receive little to nothing in the way of benefits. The reason? Insurers who offer group plans are already required to provide guaranteed issue coverage to all qualified group members (and their families, if this option is chosen by the employer) regardless of health history. Therefore, most of the subsidized benefits provided by this tax will go to individual policy holders, not group policy holders – even though the tax is levied equally on both individual and group policies.
The second tax, buried deep inside hundreds of pages of new regulations released Nov. 30, is a 3.5% “user fee” to be levied on the premiums for all policies purchased through one of the new Federal government-run health insurance exchanges. The Affordable Care Act stipulated that the Federal government would guarantee everyone access to a health insurance exchange, but the authors of the bill obviously did not anticipate 17 (and possibly more) states refusing to set up their own exchanges. Now that the government must set up its own exchanges in these non-compliant states, it has a problem on its hands – the ACA bill failed to provide any revenue for their administrative costs. This oversight was “fixed” by the new 3.5% premium user fee. However, it is unclear at this time if the Department of Health and Human Services has the authority to levy this tax.
As Phillip Klein from The Washington Examiner notes, the only thing we can be sure of with regard to Obamacare is that the program’s true costs will be known only after all the provisions of the law have been implemented – which will probably be 2015 or later. Those of us who have been paying attention already expect numerous missed deadlines, massive cost over-runs, and additional breaks and waivers for special interests. No one should be surprised that new taxes and fees will also start showing up … “unexpectedly.”