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Carriers Slam Tax Proposal

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WASHINGTON BUREAU – Health insurers say imposing new taxes on them in an effort to pay to expand access to coverage would backfire.

Officials at America’s Health Insurance Plans, Washington, and the Blue Cross Blue Shield Association, Chicago, make the case against new taxes on health insurers in a letter sent to the Senate Finance Committee.

The committee is “marking up” a health reform “chairman’s mark,” or bill draft outline, prepared by the Senate Finance Committee staff under the direction of Senate Finance Committee Chairman Max Baucus, D-Mont.

Baucus has proposed imposing $6.7 billion in additional taxes on health insurers.

The Congressional Budget Office estimates that “annual fee on health insurance providers” would increase premiums by about 1% percent, AHIP and the Blues write in their letter to the Finance Committee.

The groups also express concern about a move to limit the “age band” – the difference between the rates insurers can charge their oldest insureds and their youngest insureds.

Today, in many states, health insurers can make the age band as wide as they want to be.

Baucus originally suggested a 5-to-1 age band. In the latest version of the chairman’s mark, the age band has narrowed to 4 to 1.

If age bands are narrowed too much, premiums will rise significantly for individuals under the of 35, and that age group is the fastest-growing segment of the uninsured, AHIP and the Blues write.

The 5-to-1 age band in the original version of the chairman’s mark already reflects compression, relative to the natural distribution of underlying health care costs across age groups, the authors of the letter write.

“If age bands are narrowed or compressed too much, premiums will rise significantly for these individuals, making coverage unaffordable, and resulting in a smaller and less stable pool, and higher premiums for everyone,” the authors write.

The proposed taxes would not apply to employers providing coverage on a self-insured basis, according to Joint Tax Committee staffers who conducted a “walk through” of the latest version of the draft Tuesday. That would lead more employers to self-insure, the authors of the insurer letter write.

“This would encourage a vicious cycle, whereby the taxes are ultimately borne by a increasingly narrow group of consumers, including those purchasing coverage through the exchange,” the authors of the letter write.

If the proposed taxes were enacted and implemented, they “would undermine the shared goals of achieving universal coverage and improving the affordability and quality of healthcare for the uninsured and for those currently with coverage,” the authors of the letter write.

The new taxes would “likely be borne principally by those obtaining individual coverage in the exchange and by small businesses,” the authors of the letter write. “These new taxes, coupled with other provisions in the chairman’s mark, would make coverage less affordable to consumers.”

Proposed new taxes on drugs and medical devices would increase underlying medical costs, and those costs also would be shifted to health plans and consumers, the authors of the letter write.

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