Research

Democrats are taxing everything in sight to pay for their new government-run health care experiment.  A tax on the health insurance industry will likely be in whatever final bills the House and Senate end up voting on, and the Senate Finance Committee bill included a $6.1 billion annual levy on the insurance industry. 

In their haste to tax, Democrats haven’t thought through the implications of this policy.  The tax would start immediately in 2010, so insurance companies would have very little time to adjust their rates and policies to compensate for the new expense.  This tax would have a large effect on the smaller companies with less money. Those smaller insurers would have to raise their premiums, which will help entrench the largest insurers, leading to less competition. InsideHealthPolicy.com (subscription required) explains:

“‘In the worst case, United and WellPoint certainly have the capacity and the capital to pay the tax,’ the analysts write in an Oct. 6 note obtained by Inside Health Policy. ‘The same cannot be said across the entire group, as there continue to be a number of smaller non-profit plans with thin operating margins and capital levels that are just above regulatory requirements.’ The note points to two examples: Blue Cross Blue Shield of Rhode Island, which in 2010 would lose more than 10 percent ($23.5 million) of its excess capital above the minimum allowable level and Preferred Plus of Kansas, which would lose a third of its excess capital ($4 million). ‘While paying the tax in 2010 probably won’t put many smaller plans out of business,’ the note says, ‘it would create some capital issues that would have to be rectified through higher premium rates in the ensuing years in order to build the capital base back up, which would likely result in further market share gains by the larger plans in the market, resulting in less competition, a direct contradiction to one of the goals of the legislation.’”

This is just the latest example of how the Democrats are doing too much, too fast and explicitly contradicting the stated goals in their reform plans.