Reform’s insurance tax will hit consumers hard

There goes the affordable part of health reform. The insurance industry is warning that a new tax in in the Patient Protection and Affordable Care Act will cost consumers thousands of dollars because of rising premiums.

According to a study conducted by Oliver Wyman for America’s Health Insurance Plans, the new health insurance tax will increase the cost of health care coverage by as much as $7,000 over the next 10 years.

The PPACA imposes a new sales tax on health insurance that starts at $8 billion in 2014, increases to $14.3 billion in 2018, and will continue to increase each year. The Joint Committee on Taxation estimates that the health insurance tax will exceed $100 billion over the next decade.

“With full implementation of the ACA a year away, the focus needs to be on making coverage more affordable,” says AHIP President and CEO Karen Ignagni. “Taxing health insurance will have the opposite effect by making it more expensive.”

Ignagni says the health insurance tax will increase costs for individuals and families purchasing coverage on their own, small businesses, Medicare Advantage beneficiaries and Medicaid managed care programs.

The report found that premium increases will vary by state, but on average, the cost of a family plan sold through a large employer could cost about $7,200 more over 10 years—about $720 per year.

Families purchasing coverage in the individual market will be hit the hardest in New York while those getting coverage from a small employer will be most impacted in West Virginia. Medicare Advantage beneficiaries in New Jersey and the Medicaid managed care program in Washington, D.C. top those lists.

California tops the states that will have the highest average aggregate impact. AHIP estimates the tax will raise costs for California consumers and employers by $22 billion.

AHIP is encouraging Congress to pass H.R. 1370, legislation that would repeal the tax.