AHIP Testimony, House Tax Committee 07232012

Good morning Mr. Chairman and Members. I am Phil Griffin, Minnesota counsel for America’s Health Insurance Plans – AHIP. Thank you for the opportunity to speak this morning about this important and very timely topic. AHIP is the national trade association representing the health insurance industry. AHIP’s members provide health and supplemental benefits to more than 200 million Americans through employer-sponsored coverage, the individual insurance market, and public programs including Medicare and Medicaid. AHIP advocates for public policies that expand access to affordable health care coverage to all Americans through a competitive marketplace that fosters choice, quality, and innovation. The Affordable Care Act brought us some good news, most notably that it will expand coverage to millions of Americans, a goal that has long been supported by health plans. But there is bad news, too. And the bad news is that unless some critical changes are made, the Affordable Care Act will be anything but affordable. More to the point, as a result of the premium tax and other costly provisions of ACA, you can count on significant increases in the cost of coverage not only in the individual and small group markets, but also for Medicare and Medicaid beneficiaries who receive their coverage through private insurers. A significant source of these rate increases is a new sales tax on health insurance which is the focus of my comments today. The amount of the tax will be $8 billion in 2014, increasing to $14.3 billion in 2018. The tax does not sunset and is indexed thereafter. The Congressional Joint Committee on Taxation estimates that the premium tax will exceed $100 billion over the next ten years. The Congressional Budget Office has said that this tax will be “largely passed through to consumers in the form of higher premiums.” and I would add that it will have no direct benefit to consumers. Who, exactly, will be paying these higher premiums? · all individuals and families who purchase coverage in the individual market or through an Exchange; · Medicare beneficiaries who enroll in Medicare Advantage health plans; · the 40 states – including Minnesota -- that contract with managed care organizations under Medicaid; and · businesses, especially small businesses, that purchase insurance for their employees through the fully insured marketplace. In short, pretty much all of us. How much will our premiums increase? I have distributed a bar chart that shows the estimated impact of the new federal health insurance tax on health insurance product in Minnesota. The Minnesota Council of Health Plans estimates that the average premium will increase by 1.7 percent with the new ACA federal premium tax. A nationwide analysis by Oliver Wyman estimates that this tax “will increase premiums in the insured market on average from 1.9 to 2.3 percent in 2014” and by 2023, “will increase premiums 2.8 to 3.7 percent.” I want to emphasize how this tax will hit small businesses. According to the National Federation of Independent Businesses, there are nearly 495,000 small businesses in Minnesota, which employ over 2.5 million workers. The tax is applied only to the fully insured market – but that is where nearly all small businesses and the self-employed purchase their coverage. Small businesses are responsible for creating the majority of new jobs, so additional costs like those that will result from the premium tax, will translate to restrictions on their ability to grow and create jobs. AHIP strongly urges the repeal of this premium tax. We are not alone in seeking this repeal. Bills have been introduced in Congress calling for repeal of the premium tax and co-sponsors – including three co-sponsors from Minnesota -- are being added regularly. Current co- sponsors to HR 1370 are Minnesota Representatives Michele Bachmann, Chip Cravaack, and Erik Paulsen. We would welcome any support that you might provide to encourage additional co-sponsors from the Minnesota delegation. Before I close, I want to point out that this tax is not the only provision in the Affordable Care Act that will intensify the upward pressure on premiums. One of these is the essential health benefits provision which was intended to ensure that everyone was fully covered. But the unintended consequence is that now, people who are currently covered will be required to purchase coverage that is more comprehensive – and therefore more expensive -- than what they currently have -- or probably want. This requirement to “buy up” will, by definition, result in higher costs . and these higher costs will, in turn . strain future state and federal budgets . give small business owners one more incentive to cancel coverage for their employees . and push young people to buy coverage only when they’re sick, thus driving up the costs for all others. Other ACA provisions that will apply upward pressure on premiums include changes in age rating and the weak penalty for not purchasing coverage. These combined with the continuing rise in medical costs guarantee that unless something is done on several fronts, affordability will forever be out of reach. So, now that the Supreme Court decision has given us legal certainty about ACA, it is time for the nation to turn its attention to the goal of affordability. An important first step toward that would be repeal of the premium tax. Mr. Chairman, thank you for the opportunity to share this information. We look forward to working with you and the members of the committee as you address this critical issue..

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