President Barack Obama’s healthcare reforms may end up costing state governments $13 billion by 2023, according to a new report from The Associated Press that says insurers are unjustly passing on these costs to state officials.
The Health Insurance Providers Fee is designed mainly for insurance providers, with the rationale being as follows – if insurers could gain themselves a huge number of customers, they should be responsible for expanded coverage. As such, insurers have increased the cost of coverage for individuals and small businesses, in an effort to cover the fees. However, it also appears that these firms have also raised prices for Medicaid coverage as well.
Last October, the Obama administration provided a set of guidelines for state governments to bake the tax into the Medicaid programs for low-income individuals they pay for. An earlier tax in September was on account of the IRS, and state governments are now paying insurance providers for the Health Insurance Provider Fee. Insurers then pay the tax forward to the federal government, which would reimburse part of the fees back to the states.
This has been a bone of contention for state governments, who assert that their taxpayers have most to lose from such an arrangement. Furthermore, the health law tax is not deductible for insurance firms when it comes to their corporate income taxes, and states have to pay even more in order to cover those costs. “If they’re following the standard of practice, there’s no wiggle room” for states to shift the burden back onto the companies,” said Society of Actuaries spokeswoman Rebecca Owen.
The Health Insurance Providers Fee, according to American Action Forum president Douglas Holtz-Eakin, was one of the federal government’s new ways to pay for the so-called “Obamacare” policies. He believes that the tax “defied any notion of good tax policy.” And adding to the criticism, National Association of Medicaid Directors Matt Salo commented that the fee represents a “terrible policy no matter how it’s implemented,” and one that has to be repealed. “You’re essentially having one level of government tax another to do this,” he added.