The Affordable Care Act’s controversial “belly button” tax may be no more if a bipartisan House bill becomes law. Introduced Monday by Rep. Pat Tiberi, R-Ohio, and Rep. Daniel Lipinski, D-Ill., the bill would repeal the health care law’s reinsurance fee, which many expect will be passed on to employers.
As it stands, the belly button tax will go into effect next year to offset any lost revenue resulting from high-risk customers who buy insurance on the government exchanges. It would provide payments to health insurance carriers who end up paying higher medical bills for the new customers.
The three-year reinsurance program is expected to affect 190mn Americans and has drawn criticism from some who believe carriers will find a way to pass on the added cost of insuring sick policyholders to businesses and individuals.
“This covers every health insurance recipient, not just the policyholder,” explained Tiberi. “It’s a fee faced by everyone that provides health insurance and they will most certainly pass on the cost to their employees and customers when they can.”
“It’s simply outrageous that employers will be forced to pay the tax while they will get nothing in return from the program,” he added.
Dan Heffley, regional special master of legislation for the National Association of Health Underwriters and president of a Nevada agent consultancy firm, said the reinsurance program makes sense in theory but will end up harming consumers almost immediately.
“Some insurance companies…may be getting more of the negative risk. If insurance company A has more losses than insurance company B, the reinsurance program will help take some of the sting away,” Heffley said. “The problem is all the fees and costs are being filtered down to the end user, the insured. About $63 is what it’s coming to per person—that’s what’s going toward reinsurance.”
Heffley added that many carriers have already begun to itemize the reinsurance tax, “like on a phone bill.”
The Obama administration has recognized some of the negative effects of the reinsurance tax, announcing its intention to provide an exemption from the fee for “certain self-insured, self-administered plans” for 2015 and 2016. However, many employers feel the exemption is too narrow and Tiberi called the proposal “too little, too late.”
“A delay or exemption does not change the fact that the overwhelming majority of employers will still have to pay this tax,” the congressman said. “We need to provide stability and security, not provide another incentive for employers to discontinue their coverage.”
The bill has received widespread support from all corners of the workforce, including labor unions and both large and small businesses. The American Benefits Council, the National Retail Federation, the Corporate Health Care Coalition, the Business Roundtable and the National Association of Manufacturers have also voiced support for the bill.