Washington, D.C. will tax all insurers selling policies to district residents to fund the city’s Obamacare exchange.
The plan was proposed by DC Health Link, D.C.’s exchange. The city’s health care law marketplace was allotted $133 million in federal grants to launch, but along with all the state marketplaces, was expected to be soon be sustainable on its own via a flat tax placed on each insurance plan sold through the marketplace.
When taxing those buying insurance didn’t turn out to be as lucrative as Congress had hoped, D.C., along with several other states, began to look at taxing those selling insurance instead.
The Obamacare exchange has a 2015 budget of $28.8 million and hopes to fill its coffees by collecting another fee from insurers.
The exchange reportedly opted to tax all insurers, including those who deliberately chose to stay out of the risky Obamacare exchange, to lower the cost per-insurance company. The tax will likely amount to 1 percent of the amount of money each insurer collected in total health insurance premiums, according to the exchange.
Kaiser Permanente and Aetna, who both offer exchange plans, have reportedly supported the plan, according to exchange officials. A top insurance industry trade association, America’s Health Insurance Plans, however, have pushed back against the legality of taxing companies that chose not to participate, Wall Street Journal reports.
All insurance companies are already heavily taxed due to the Affordable Care Act. The health insurance tax, one of the most significant assessments included in the health care law, charges each insurance company based on the number of insurance plans sold — and is expected to collect $8 billion this year and grow to $14.3 billion by 2018.
Obamacare’s insurer tax will likely be passed onto customers in the form of higher premiums, however. The health insurance tax alone is expected to raise premiums by $101 on average this year alone, according to a March study from the free-market think tank American Action Forum.
Seven taxes initiated by the health care law will hike premiums for exchange customers by $354 in 2014, according to AAF, and by $196 for those with employer-sponsored health insurance.
Adding another tax onto those health insurers are already required to pay could up premiums even further.
D.C. is the first Obamacare exchange to approve taxing all insurers operating in the state to fund exchange operations, but several states have proposed doing so as well. Colorado and Hawaii are still considering their proposals. (RELATED: Obamacare exchange asks for fee on all insurance policies)
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