Insurers warn how much new government fee would raise premiums

Health insurance trade group America's Health Insurance Plans released the first per-family estimates of how much the cost of coverage will increase because of an annual fee paid by insurers under health system reform.

The annual fee, which AHIP refers to as the "premium tax," takes effect in 2014. AHIP opposes the fee and argues that it counters one goal of health system reform -- lowering the cost of coverage.

But the Dept. of Health and Human Services was highly critical of the figures, which were part of a study commissioned by AHIP.

The insurer fees will raise the cost of health insurance between 1.9% and 2.3% in 2014, according to calculations by consulting firm Oliver Wyman and released in an Oct. 31 report. The fee will add a little more to rates each year, so that by 2023 premiums will be between 2.8% and 3.7% higher than they would be otherwise.

If the fee results in higher premiums, the effect on physicians would be twofold. First, many doctors in private practice could have a harder time paying for employee coverage. Second, if the cost of coverage rises, benefits could be scaled back, driving down patient visits. But proponents say the fee could be less expensive than AHIP claims or offset by other benefits included in reform.

In an emailed statement regarding the AHIP study, HHS spokeswoman Erin Shields said the estimates are "fundamentally flawed" because they look at the fee in isolation, ignoring the other parts of the Patient Protection and Affordable Care Act that may lower the cost of coverage.

"In 2011, the nation's largest insurance companies are set to enjoy a third year in a row of record profits, consistently beating Wall Street analysts' predictions," she said. "And when reform is fully implemented, insurance companies will have 24 million new customers. But this report assumes this provision of the law is passed on fully to the purchasers of insurance. If insurance companies insist on sticking consumers with bigger bills while their profits rise, they will be required to justify their actions to the public. And consumers will be able to choose insurance companies that give them a fair deal."

The revenue from the fee, which will bring in an estimated $73 billion between 2014 and 2019, is supposed to pay for the other parts of the reform bill. Some independent analyses, including one by the Congressional Budget Office, have concluded that the cost of the fee will be passed on to consumers in the form of higher premiums.