AHIP: Insurance tax will dramatically raise premiums

The insurance tax required under the reform law will increase consumers' insurance costs by as much as $7,000 over the next 10 years, according to a study commissioned by America's Health Insurance Plans.

Insurers will be taxed $8 billion in 2014 and then $14.3 billion in 2018. The tax amount will increase each year thereafter, potentially soaring to as high as $100 billion over the next 10 years, The Washington Examiner reported.

"Taxing health insurance will have the opposite effect by making it more expensive," AHIP President Karen Ignagni said in a statement. That's because insurers are expected to pass the added costs onto consumers.

The rate at which premiums will grow depends upon the state, but on average, an employer-based family plan could cost roughly $7,200 more over 10 years, or about $720 per year, reported The Hill's Healthwatch.

California consumers will see the largest growth in premiums, potentially rising as high as $22.4 billion in 10 years. New York, Pennsylvania, Florida, Texas, Illinois, New Jersey, Ohio, Georgia and Massachusetts round out the top 10 states that will be most impacted by the insurance tax, the study found.

"At a time when [Massachusetts] is taking steps to contain cost, the health insurance tax at the federal level is going to exacerbate the challenge of getting costs under control," Eric Linzer, senior vice president for government relations at the Massachusetts Association of Health Plans, told The MetroWest Daily News. "What would have to happen at the federal level is a repeal of the insurance tax."

AHIP has been trying to do just that, supporting legislation (H.R. 1370, S.1880) that would repeal the tax. So far, however, the bills have been stalled in Congress.

To learn more:
- here's the AHIP statement and study
- check out The Hill's Healthwatch article
- see the Washington Examiner article
- read the MetroWest Daily News article