By Martin Vaughan
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)
Despite the change, Kaiser says it would still shoulder an unfair amount, and will continue to fight to strip out or alter the tax in the health bill the Senate is taking up next week.
"The language in the Senate bill is an improvement, but it remains inequitable and would have unintended consequences," said Chris Stenrud, spokesman for Kaiser Permanente.
A provision added to the bill before its unveiling last week would ensure that the tax applies not only to plans insured by companies like Cigna Corp. (CI), Aetna Inc. (AET) and UnitedHealth Group Inc., (UNH), but also to the fees the insurers earn when they act as third-party administrators for companies that fund their own health benefit plans.
About 57% of workers who have health insurance are in plans funded by their employer, according to the Kaiser Family Foundation's 2009 survey of employers. In many cases, the employer contracts with a benefits administrator, often an insurance company, which processes claims.
"What you get when you contract with a third-party administrator is their expertise, and access to an already established, broad network of providers," said Paul Dennett, senior vice president at the American Benefits Council, a trade group representing large employers.
The health-insurance industry tax in the Senate bill would be divided among insurers, based on their market share. In an earlier version passed by the Senate Finance Committee, each company's fee would have been determined based on its share of premiums written. Self-insured plans would have been disregarded when calculating the tax.
Kaiser Permanente, Intermountain Healthcare, and Geisinger Health System complained to senators, saying the tax was unfair. As integrated providers, all of their business would be subject to the tax; but self-insured plans would escape it, they argued.
According to a letter those three organizations wrote to senators, Kaiser would have paid 8% of the $6.7 billion tax, even though it insures only 3% of Americans with health coverage.
The revised Senate bill unveiled by Senate Majority Leader Harry Reid (D., Nev.) last week would also include fees paid to third-party benefits administrators in the calculation of the tax. It would not apply to benefits administrators who are not health insurance companies.
Stenrud, the Kaiser spokesman, says the tax remains unfair because fees paid to administrators only account for a small percentage of the cost of care. That means that for self-insured plans, as little as 6% of plan costs would be taxed, while 100% of plan costs would be taxed for fully insured coverage.
Whatever the structure of the tax, the health-insurance industry is gearing up to fight it on the Senate floor and in possible conference negotiations between the House and Senate.
"New health-care taxes will only make health-care coverage less affordable for families and small businesses across the country. That is the opposite of what health-care reform is supposed to accomplish," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, a trade group.
The Senate bill is expected to result in coverage for about 31 million Americans who are now uninsured, many of whom would receive government subsidies. That is new business for private insurers, and Senate Democrats argue that the taxes makes sure the industry chips in on costs.
Industry lobbyists are seeking to reduce the dollar amount of the tax, and delay its effective date. The tax would kick in in 2010, even though the bill's health insurance mandate and coverage subsidies wouldn't kick in until 2014.
- By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@dowjones.com