Insurers try to shift billions in reform taxes onto Medicaid

To defray some of the $150 billion in insurance taxes imposed under the healthcare reform law, insurers hope to shift the fees to Medicaid members, Bloomberg reported.

Such cost shifting could cost Medicaid up to $39 billion between 2014 and 2023, depending on how quickly states expand their programs. Plus, annual Medicaid payments will increase by almost 2 percent each year starting in 2015, according to a study conducted by Milliman on behalf of the Medicaid Health Plans of America (MHPA).

"It is apparent now more than ever: The health insurance tax is an ill-conceived method to finance the ACA and it will be on the shoulders of our country's sickest and poorest," MHPA CEO Jeff Myers said yesterday in a statement.

Despite the increased costs, some insurers have succeeded in getting Medicaid programs to cover the fee. UnitedHealth obtained written agreements from eight of the 24 states where it operates Medicaid plans, as well as verbal commitments from other states.

Aetna also has found support from states. "The good news is that nominally most states recognize that it needs to be an element of the rate," Aetna Chief Financial Officer Shawn Guertin told Bloomberg. "Medicaid has always been a low-margin business."

What's more, shifting the taxes is critical for some insurers to maintain profits this year. Because insurers can't deduct the fee from corporate income taxes, they will feel its affect more profoundly. "It could absolutely be a big chunk of profits" for some insurers, Thomas Carroll, an analyst with Stifel Nicolaus & Co., told Bloomberg.

To learn more:
- here's the Milliman study
- check out the MHPA statement (.pdf)
- read the Bloomberg article (.pdf)