Insurer Fee – Reasonable Idea… Unintended Consequences

Author : Chris Whistler

Vice President, Government Affairs at CareSource Over 15 years of experience in public policy and finance, with a focus on the Medicaid program. Responsible for working with policymakers to ensure that they understand the benefits CareSource brings to our members and to taxpayers, and for leading advocacy for legislative and programmatic changes that enable CareSource to better serve our members.

Dec 10th, 2009 | by Chris Whistler

Whenever a new concept is proposed, those at the deliberation table automatically ask “what would happen if?” before they decide to act. With health care reform for example, the driving questions are more like: “Are the changes going to result in more Americans getting coverage? Are the proposed changes budget neutral?” Given the broad scope of the proposed health care legislation, it’s easy to see how details can get overlooked. And when time is ticking, unintended consequences have a higher chance at prevailing.
One concern that should be brought to light is the $6.7B annual fee proposed on insurers. While conceptually this might make sense given the number of Americans who will be required to obtain coverage and the new revenue that insurers stand to gain, a portion of this fee would not be limited exclusively to commercial health insurance companies. Health plans that contract with federal and state governments to serve Medicaid, Medicare, and beneficiaries of the Children’s Health Insurance Plan (also known as CHIP) would also get taxed too.
Well, the challenge is that a significant portion of this fee will fall on state budgets because of the way states are required to reimburse health plans that serve its most vulnerable residents. The new fee will unintentionally require states and the federal government to ultimately come up with additional public dollars to pay for this added fee.
Also, this fee would unfortunately raise the overall costs of these government programs and place additional strains on programs that are already in extreme financial distress. For example, Ohio’s Medicaid program would have to potentially come up with an estimated $65 million annually. Subsequently, the burden of this fee will be paid for by taxpayer-funded government programs and beneficiaries that use these health plans.
Easy solution to the problem? Just exempt health plans administering government entitlement programs from the application of this fee. Problem solved; Unintentional consequence diverted.