This posting only focuses on one unintended consequence, but it is certainly important to the budgets of state governments. According to an article by Carala K. Johnson of the Associated Press, “A tax on health insurers is helping pay for President Barrack Obama’s health care law, but it’s proving costly to state governments—as much as $13 billion in less than a decade.” The Health Insurance Provider’s Fee was supposed be covered by insurance companies because they would earn a windfall from Obamacare. Those who wrote the law believed those companies should pay for the expansion of coverage, but they apparently didn’t know how business works. The insurance companies raised prices to cover the costs of the new tax instead of just absorbing the cost. Businesses tend to continue to stay in business by making profits from their activities. Expecting the insurance companies to simply absorb additional costs was, to be kind, both naïve and silly.
The price increases passed on by the insurers affected state Medicaid programs, and they have had a huge impact. “State governments pay insurers for the tax; the insurers then pay the tax to the federal government. The federal government then reimburses part of the costs to the state. It might sound absurd, but it’s not amusing to state governments, which lose 54 cents for each dollar of insurance tax.” Another strange and detrimental impact of the law is that the health care tax is not deductible for insurance companies, so state governments must provide additional funds to cover that additional cost.
I find the false economics isn’t the saddest part of the story. One of my doctors made the comment that insurance provided by Medicaid “is a myth.” He explained that people think they have Medicaid insurance, but find that a limited and shrinking number of medical practices accept Medicaid patients. The result is that a person with Medicaid coverage must wait many weeks or even months for an appointment. Not a good thing if you have a medical need. The outcome is that people who have Medicaid aren’t getting health care and the States are paying penalties. Maybe we should be thinking about a better way of solving the problem. Maybe businesses that have a reputation for finding competitive solutions to problems could be lured in by the promise of profits.
As an aside, I’ve heard one of the best parts of Obamacare is the allowing children to remain on their parent’s plans until age 26. If that’s such a great idea, why not 36, 56, or until the parents are no longer around? (Just kidding, maybe?)