The Tax Man Cometh

When you purchase a car or a shirt or a pair of sunglasses, you expect to pay sales tax. The rates vary by state or city, but you can be sure you’ll see an extra charge for sales tax on a receipt for anything from movie tickets to a burger and fries.

One thing you don’t associate with sales tax is health insurance. It’s not a thing that you can put in a shopping bag or have delivered by UPS. It’s a service, but it’s not like having your car repaired or dishwasher installed. But Obamacare is about to levy a massive sales tax on health insurance. According to a Forbes article, “The Unsung, But Massive Obamacare Sales Tax Increase That Is On The Way,” the massive sales tax on health insurance is going to dramatically increase costs for consumers and employers.

No one is surprised that Obamacare is a huge tax increase. Even the Supreme Court called it a tax. There are, in fact, 21 new taxes from Obamacare. The largest, the sales tax, hasn’t gotten much attention. The article refers to a Joint Committee on Taxation Report that recalculated the cost to insurers, consumers and employers shortly after the Supreme Court rulings. The report showed that over the next 10 years, the new taxes will cost these groups over $675 billion. The sales tax on purchasing health insurance will come in close to $102 billion, the largest of them all.

One group, the American Health Insurance Plans, headed by President Karen Ignaigni, is working hard to get the health insurance sales tax repealed before it goes into effect in 2014. The AHIP, a trade association that represents health insurance providers, says the taxes will put a burden on families and businesses in a weak economy when they can least afford it. 

The tax burden doesn’t discriminate, according to the report. It will affect individuals, families, small businesses, people with disabilities and those on Medicare and Medicaid. In fact, they estimate that the tax increase will be higher than the penalty for not purchasing health insurance. Young, healthy individuals may actually “opt out” of purchasing health care and pay the penalty rather than the taxes.

According to the article, the President feels money generated by the sales tax and the other 21 are necessary to pay for healthcare reform. It’s going to be expensive. What the AHIP and John Goodman, author and President of the National Center For Policy Analysis, fear is that the taxes will hurt those who were promised no tax increases—the middle-income families. 

Another group who will feel the sting of the higher sales taxes is those on Medicaid-managed care plans and seniors on Medicare Advantage Plans. Costs for the latter group members will rise up to $20 by 2013 and a whopping $42 by 2023. The price tag over the next ten years may go as high as $3,600. 

While the sales tax and other taxes may be levied against insurance providers and others, it’s the consumers that will pay the tab in higher premiums. If taxes are too high, those whom Obamacare was created to protect may just opt out altogether and pay a lower penalty. Staying healthy and staying out of the doctor’s office and hospital may be a side effect of healthcare reform that was not intended but becomes a choice for those hardest hit with the new taxes.

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