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A Health Insurance Premium Tax Would be a Chicken Tax

The Congress has looked at taxing about everyone and everything to pay for half the cost of a health care bill.

They’ve considered sugary soft drinks, beer, “millionaires,” and “gold plated” health benefits to name a few. Every time they come up with one it gets shot down by the interests it would offend.First, as I have asked on this blog before, why do we need to use at least $500 billion in new taxes to pay for half the cost of a health care entitlement expansion bill? We will spend somewhere between $35 trillion and $40 trillion on health care in this country over the next ten years. Many experts contend there is as much as 30% waste in what we spend.Advocates of a health care bill say we need it to reduce the cost of health care in this country that will otherwise bankrupt us if we don’t fix it.

With as much as $10 trillion to $12 trillion in waste, and cost containment as the stated goal, why do we need to raise people’s taxes $500 billion to pay for an expansion of coverage?But since it is clear that the Congress and the White House have all but given up on real health care reform that would really “bend the curve” they are adamant they are going to raise taxes to pay for at least half the cost.

So, being rejected by all the interests that effectively countered every other idea for a tax increase, advocates now look to be excited about taxing insurance companies. The most talked about tax would be a tax on insurers who issue the “gold plated” policies—apparently a surtax on the value of such policies. But there has also been talk of a broader premium tax on all policies.First, having run an insurance operation I can tell you exactly what the insurers will do with that tax—pass it directly onto the consumer. Today, most states charge a premium tax—usually about 2% of premium—on all insured (not self-insured) health insurance business. When calculating the premium on those policies, the insurer just adds the 2% tax as an expense factor and passes it on to the customer—like all other costs of doing business. This is not a theoretical exercise—the tax gets directly passed on and is embedded in the premium the consumer pays.That’s why this would be a chicken tax.Given all the beating the advocates have taken on all of the other tax ideas they’ve floated in recent weeks and having had to retreat on those, they are now looking at having someone else be the tax collector.”This is a tax on insurance companies” goes the political argument—not on consumers or sugary soda or millionaires. The tax on insurers is popular this week because they are at the bottom of the political heap in Washington, DC these days—all that “good will” from things like $2 trillion offers hasn’t gotten them a lot.And, such a tax “would discourage such overly generous health plans” goes the reasoning.But it’s still a chicken tax—chicken because the politicians aren’t willing to look voters in the eye and tell them that with $10 trillion to $12 trillion in waste they still have to raise their taxes by at least $500 billion to pay for a health care entitlement expansion and chicken because those same politicians can’t face the “millionaires,” or unions, or even soda bottlers, or people with “gold plated” health care directly, or the rest of us for that matter, and tax us all directly.When you get down to it, this is all devolving into a chicken exercise because no one in the Congress is really willing to face the real issue—the cost of health care in America. What else would you call a bill that will expand the health care entitlement but not face the hard choices necessary to really make America’s health care system affordable and sustainable?Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog.

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Rosana SimsonCarol JamesAmirDaniel K. RobinDana Blankenhorn Recent comment authors
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Rosana Simson
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Rosana Simson

A friend of mine told me about a site that offer 40% discount on health insurance.I tried this company.They are great.You can check their site.
http://www.MyBestHealthInsurance.Info

Carol James
Guest

Great information!
Actually most of the sites that can be found on google top pages does not offer cheap prices on health insurance.If you want to find really cheap prices, you’ll have to search more…
I spend almost a month, searching cheap sites that offer health insurance, and I found only a few …
Here is one of them:
http://www.NationalHealthInsurance.info
You can save up to 40% on your health insurance …
Hope that helps.

Carol James
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Great Share! I have been struggling to find good affordable health insurance for a while. My friend told me about a site where i can compare health insurance quotes. I found a great deal on health insurance now! I thought i would help everyone and share it, here it is:
http://www.NationalHealthInsurance.info

Amir
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Very interesting post and comments. I have written up many of these ideas on my site about health reform and I think anybody interest in this blog will find the information there very salient. Many of the ideas are things I am studying right now at The Wharton School as an MBA, although I combine thoughts as a practitioner in industry as well.
Please do check it out!
http://www.satvathealthcare.com
All ad profits go to fight ulcerative colitis!
Best,
Amir

Daniel K. Robin
Guest

The End of Creativity for Health Insurance. A story. In the year 2018, the Association of Family Doctors commissioned the creation of an interactive computer program to assist themselves and their patients with the diagnosis and treatment of disease. It was developed as “cloud technology” for use on the Internet. In order to obtain access you had to have the password of the month supplied by your own family practitioner. Advertising by specialists and drug companies on the program make it possible to provide free use of the program to members. Dr. Hans Matthew, a recent graduate of medical school,… Read more »

Dana Blankenhorn
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I have always assumed that most of the waste resulted from paper and doctors not following best practices.
Both are addressed by the HITECH Act, and the whole “comparative effectiveness” brouhaha is also aimed at what is called “waste.”
If people want more than what best practices recommends, they can pay for it.

Health Plan Veteran
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Health Plan Veteran

A tax on health care is probably necessary to address the near term budget shortfall that moving towards universal coverage will entail. That being said, a tax on hospital services may make more sense in that it raises the price of ER services relative to physician office visits (a low hanging fruit for utilization management) and captures revenue from all patients. The key exclusion of a health insurance premium tax is that it doesn’t get one penny from self funded benefit plans, which represent a sizable chunk of the overall private health care spending in the US.

Ray's Travel Report
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Most “health care ” is a joke anyway herbs all the way.

Peter Nesbitt
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Yup, got it right there, Robert. Question. Does anyone in the administration or congress understand what we really need to do to eliminate that 30% waste? Are they talking about it? Bauck, bauck, bauck. (chicken talk)