Providing Answers the President Won’t Provide
Does the President Understand What Taxing Insurers Will Do?
Alexandria, VA — Over the weekend Senate Finance Committee Chairman Max Baucus (D-MT) proposed a new tax on health insurance premiums — about $6 billion a year — as a way to help pay for the Democrats’ health care reform legislation.
If anyone wants to know why the government-run public option will be a stacked deck, just look at this proposal.
Any economist will tell you that a $6 billion annual tax would increase private sector health insurers’ administrative costs and eventually filter down in the form of higher premiums. Which, of course, leads to our elected representatives complaining about how much more expensive private health insurance is than some public option run by the government.
Would the public option also pay the tax? Of course not. Would it pay the premium tax that states already assess on health insurers operating in the state? Of course not. Oh, and does the tax apply to all the nonprofit health insurers?
But can’t health insurers just take that tax out of their profits? Despite all the harangues about windfall profits, health insurance is one of the least profitable industries — about 2.2 percent. According to a recent article on CNBC’s Jim Cramer’s The Street, “If business stayed the same during the last three months of 2008, it’s likely that [health insurers'] net income dropped to less than $11.6 billion for the year, compared with $17.1 billion in 2007.” So a $6 billion new tax would cut profits in half, to perhaps a little over 1 percent.
You have to sit back and marvel at the hubris of elected officials complaining about the high price of health insurance even as they consider new taxes on health insurers that would make premiums even higher.
And when even more people who can’t afford the higher prices imposed by the politicians decide to drop their coverage, those same politicians will say: “I told you so; that’s why we need the public option.”
– Merrill Matthews, Executive Director, Council for Affordable Health Insurance
About the Council for Affordable Health Insurance
Founded in 1992, CAHI is a nonprofit, nonpartisan research and advocacy association whose mission is to promote access, affordability and choice in American health care. CAHI’s membership includes health insurance companies (active in the individual, small group, HSA and senior markets), small businesses, physicians, actuaries and insurance producers and brokers.
Website: http://www.cahi.org
