A pair of Obamacare taxes are poised to strike health companies at the end of this year, adding more pain to what’s already been a rough few months for insurers.
The 2010 law’s tax on health-insurance companies and a 2.3 percent excise tax on medical devices are both slated to take effect in the new year, after a two-year delay.
Combined with the GOP’s tax-cut push, which could sap millions of customers from insurers’ rolls over the next decade, insurance executives are pleading for relief, saying Congress should at least nix the tax on premiums, while device-makers point to bipartisan support for killing the levy on their sales.
“We’re sort of, writ large, frustrated as an industry,” said Greg Crist, spokesman for AdvaMed, a trade group for device manufacturers. “We felt like it should have been done sooner.”
Industry officials say they’re hopeful that GOP leaders can find some kind of reprieve by Jan. 1, though they didn’t get any relief in the tax-cut bills the House and Senate have passed. A final compromise is being worked out.
“All I can say right now is Republicans are staying at the table. We want those taxes out of the health care [system] and out of the economy as soon as possible. So stay tuned,” said House Ways and Means Committee Chairman Kevin Brady, Texas Republican and lead tax-writer for his chamber.
The tax-cut bill is one of a number of must-pass bills Congress is working on this month, giving industry advocates some hope they will win relief.
In a brief statement, the White House said Mr. Trump supports congressional efforts to delay Obamacare’s “harmful taxes” amid redoubled efforts to repeal and replace the whole law.
“The president remains committed to providing the American people with affordable health care, including relief from the onerous mandates and taxes of the catastrophic Obamacare law,” said Deputy Press Secretary Hogan Gidley.
The health insurance tax, or “HIT,” is a fee that rises by a set amount each year and is divvied among insurers based on the share of premiums they collected the prior year.
Freezing it in 2018 would cost the federal government about $14 billion.
Repealing the medical device tax would cost the government nearly $20 billion through 2026, the Joint Committee for Taxation said earlier this year.
Opponents of the device tax insist they have a strong case, saying it stifles innovation and was put into the 2010 law as a revenue raiser, rather than as a policy goal.
“I think there’s been bipartisan agreement about the tax for some time,” said Shaye Mandle, president and CEO of Medical Alley Association, which represents health care companies in Minnesota. “Whether it’s going to be a in a standalone bill or a larger package — [like] the extenders — or full repeal or suspension for a period of time is the work that needs to be resolved.”
Insurers, meanwhile, have railed against the HIT for years, saying they end up passing the costs on to consumers in the form of higher premiums.
“It is a fact that when a product or service is taxed, it is more expensive for consumers to purchase. Taxing health insurance is no different,” the top insurers’ lobby, America’s Health Insurance Plans, wrote earlier this year to Sen. Orrin G. Hatch when the Utah Republican and Senate Finance Committee chairman solicited ideas on reforming the tax code.
Analysts said customers are paying an extra 2.5-3 percent extra for coverage they’re buying right now, because insurers baked the cost into 2018 plans instead of assuming the tax would be delayed again.
“It’s not a huge amount of money, but it’s also not nothing,” said Chris Sloan, senior manager at Avalere, a health policy consultancy.
Congress is already trying to rein in runaway premiums, but has been looking instead at restoring cost-sharing payments for Obamacare insurers or federal funding for reinsurance programs that blunt the cost of sicker, pricier customers in the individual market, so healthier consumers don’t have to pay more.
While those fixes might have a bigger impact on premiums than repealing the health insurance tax, the HIT is more far-reaching, affecting coverage beyond the Obamacare exchanges and individual market, such as plans that private insurers offer through employers or government programs like Medicaid.
“One area where we find an astounding degree of bipartisanship is stopping the HIT,” said Rep. Kyrsten Sinema, an Arizona Democrat eyeing a Senate seat in 2018. “Eliminating the HIT is a measurable way to decrease health care costs for families, seniors, and small businesses alike. Congress needs to get this done now.”
• Tom Howell Jr. can be reached at thowell@washingtontimes.com.
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