Consumers Hit With Surprise Tax in Obamacare Premium
Policy + Politics

Consumers Hit With Surprise Tax in Obamacare Premium

Almost No Transparency in New Fees and Taxes

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Obamacare isn't just impacting the uninsured. Americans who already had health coverage before the Affordable Care Act will likely pay more this year and even more in the years to come.

Insurance companies, faced with new Obamacare fees and taxes meant to help fund the law, are planning to pass along the added costs to consumers. This includes the multibillion-dollar annual “Insurance Providers Fee,” which took effect in January and is assessed to each company based on its share of annual premiums collected by the entire industry. This new fee is expected to raise $8 billion this year and more than $100 billion over the next decade.

Related: How Obamacare Could Affect Your Taxes This Year

Though the fee is crucial to financing Obamacare, industry experts and administration officials have confirmed that it will be passed on to consumers in the form of higher premiums or out-of-pocket costs – an  issue that’s been a concern to both advocates and adversaries of the law since it took effect in 2010.

Until now, however, the financial impact of the fee has been unclear. The conservative American Action Forum crunched the numbers and found that individuals with employer-based plans are likely to pay an extra $77 this year as a result of the tax. Families with employer-based coverage would have to pay an extra $266. The study said these amounts will increase to $139 for individuals and $476 for families by 2018 and will continue to increase after that as well.

A separate analysis in 2011 by the New York-based consulting firm Oliver Wyman found that the fee could push up individual premiums by about 2 percent.

Though most insurers aren’t telling consumers that the cost of their plans have increased because of new Obamacare taxes, one company, Blue Cross Blue Shield of Alabama, included a line item labeled, “Affordable Care Act Fees and Taxes,” to identify the new costs. One customer’s bill showed that these new taxes added up to an extra $23.14 a month, or $277.68 annually, Kaiser Health News reported. The individual’s monthly premiums rose from $322.26 to $345.40.

Related: 10 Top Questions Consumers Ask About Obamacare

Still, Obamacare proponents say the new taxes are crucial to funding the law. They argue that insurers are subjected to new taxes but also stand to bring in billions in new revenue from the millions of Americans acquiring health coverage for the first time.

Proponents also point out that the taxes help fund the subsidies provided to consumers under the law, which help make plans more affordable. Federal subsidies are only available to use, however, toward plans purchased on the exchanges. 

There are 21 new taxes under the ACA, including a 2.3 percent medical device sales tax estimated to raise $29 billion over 10 years, and a fee for brand-name drugs that will bring in another $34 billion. The Joint Committee on Taxation estimated that all new ACA taxes and fees will cost taxpayers more than $675 billion over the next decade.

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