Monday, February 10, 2014

Can you afford affordable care?

The Affordable Care Act, commonly known as Obamacare, continues to be discussed, debated and digested virtually every day in the news. Like it or not, everyone has an opinion by now.

One major complaint has been the unexpectedly high cost. There’s no question that many people, including me, have not only seen a dramatic increase in monthly premiums but also a reduction in coverage.

My cost nearly doubled, so I understand the anger. But, I was curious when I saw a new line on my monthly health insurance bill for federal and state taxes and fees. It totaled $80 per month, just over 10.5 percent of my new increased premium.

It was surprisingly difficult to get details about this new line, but I was persistent, and eventually discovered that it’s a complex summary of several new taxes and fees, seven to be exact.

Here’s a dollar breakdown of how those seven new items apply to my monthly bill; what they’re for and how they’re to be used.

First, there’s a Federal Insurance Premium tax, which is a tax on the insurance industry by the federal government, which, of course, is passed on to the consumer. For me it comes to just over $25 per month.

This is followed by a competitive effectiveness fee, which helps fund a patient-centered outcome research institute that helps compare different medical treatments. This adds just 42 cents to my premium.

Then there’s a reinsurance fee, which adds nearly $13. This is to help stabilize the cost of insurance during the future years of health care reform.

In addition, there’s a risk adjustment fee that costs me 17 cents per month. This is to compensate insurance companies for having to insure less healthy members, thereby helping to keep costs stable.

My favorite is the market place fee of just over $22. This is to help fund the fiasco that is the Affordable Care Act health insurance marketplace web site. It’s supposed to be self-sustaining and removed by January 2015. I have my doubts that it will ever go away.

But wait, there’s more. Michigan got into the act with the Michigan claims tax, a 1 percent tax on health insurance claims. For me, this amounted to just under $7 per month. Finally, there’s the state insurance premium tax, which taxes Michigan health insurance policies that cover individuals rather than groups. This one costs me just over $12.50 per month.

Summing up, this one new line on my bill adds another $950 per year to my tab. And that’s on top of a health care premium that nearly doubled.

As a financial advisor, I always suggest to my readers and clients that they understand any charges and fees associated with an investment. In that same manner, I think it’s important that, as taxpayers and consumers, we understand where and how those that collect our money are spending it. I was alarmed to see a new tax item that totaled in excess of 10.5 percent. I wonder how many even noticed this new line item tax, let alone questioned it? Personally, when I see a new tax that’s in excess of ten percent, I want details. I think the regulators and health care industry could have done a much better job with their disclosures.

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