Piping Up: The Ulterior Motive Behind Rising ObamaCare Premiums

Last week, proponents of ObamaCare celebrated the one-year anniversary of the passage of the landmark health care law with several hundred events across the country. They have little reason to cheer, according to a sobering new study.

In the report, former Congressional Budget Office Director Douglas Holtz-Eakin calculates that health reform’s tax on insurers, which takes effect in 2014, will raise family premiums by $5,000 over the decade–all by itself.

So much for President Obama’s campaign promise that his health reform plan would “bring down premiums by $2,500 for the typical family.” Unless Congress rolls back ObamaCare, Americans can look forward to higher premiums, fewer choices and bigger tax bills.

To fund their trillion-dollar health care adventure, Democrats socked some of the most popular bogeymen–insurers, drug companies and medical device firms, among others–with new taxes. Pharmaceutical companies face a steadily increasing multibillion-dollar tax bill through 2019, while device companies have to send 2.3% of their revenues to Washington.

Insurers get the worst of it. They’ll pay $8 billion a year starting in 2014–and $14.3 billion annually four years after that.

The president and his allies have decried the industry’s profits and executive salaries, claiming that insurers can more than afford to fund the expansion of coverage–and offer more generous benefits.

A number of regulations on insurance companies have already come into effect. For instance, young adults can stay on their parents’ insurance until they’re 26. Co-pays and deductibles for preventative care are also eliminated. Limits on annual and lifetime out-of-pocket spending are being phased out too.

Of course, somebody has to pay for all those new taxes and benefits. And those somebodies won’t be insurers or drug firms. They’ll be American patients.

Insurers are already passing along their new costs to consumers. Celtic Insurance Co. in Wisconsin and North Carolina, for example, says that half its 18% increase in rates was directly attributable to ObamaCare. Regence BlueCross/Blue Shield of Oregon blames the new law for a fifth of its upcoming rate increase.

And it will only get worse. Between 2014 and 2020, ObamaCare envisions extracting nearly $90 billion from insurers in the form of an excise tax.

But the bill will actually be much higher. Because these new fees are not tax-deductible for insurers, each additional premium dollar raised to pay the excise tax will face 35 cents in income taxes. So the true cost of the excise tax to insurers is nearly $135 billion. They’ll therefore have to jack up prices by $1.54 to generate one buck for the excise tax. And in states with income or premium taxes of their own, insurers will face an ever steeper bill.

Holtz-Eakin estimates that consumers will basically see a 3% increase in their premiums to offset the new excise tax.

This insurance tax could also drive workers’ wages down. If employers have to pay more for their employees’ insurance benefits, they will have less cash to devote to salaries, raises and bonuses.

ObamaCare’s supporters have made no secret of their desire to stick it to the insurance industry. By making insurance more expensive, they may force more and more people to leave the private market and seek coverage through the new government exchanges.

And that may be the point–to drive ever more Americans to dependence on the government for their health care.

Former House Judiciary Committee Chairman John Conyers, D-Mich., admitted as much, stating that he viewed the health reform law as a “platform” for a government-run, single-payer health care system.

ObamaCare’s hefty insurance taxes may provide Rep. Conyers, President Obama and other similarly minded Democrats with the seed money to set one up.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top