Insurance companies are planning to start bracing for the impact of ObamaCare in the coming days by passing on higher insurance premiums to the insured.
While most of the provisions of President Obama’s Affordable Care Act will not go into effect for several years, insurance companies are preparing to pull in more money now to cover the anticipated tax increases, the majority of which will not go into effect until 2014. In addition, in 2014 the first significant ObamaCare initiatives—what is known as the individual mandate, various insurance subsidies, and free birth control—will go into effect.
Experts forecast that insurance companies will boost insurance premiums for both individuals and businesses by approximately 2 percent this year. By the early 2020s, insurance premiums will be roughly 3.5 percent higher.
Those who earn a high income—above $250,000 per year—are already feeling the tax effect of ObamaCare, as they are paying almost 1 percent more in Medicare taxes and almost 4 percent more in taxes on investment income.
Although blame is likely to be cast at both insurance companies for increasing premiums and the Obama administration for enacting the legislation that is providing more extensive “free” health care, in the end, it may be the American people who are to blame. After all, Americans are the ones who voted on the whole for better insurance coverage. But it will come at the cost of higher insurance premiums.
“The goal was to make health care more affordable, but adding a tax on health insurance does the opposite, increasing the cost for families and small businesses,” noted Robert Zirkelbach, a spokesperson for America’s Health Insurance Plans. Zirkelbach noted that younger adults will be hit the hardest by the health care cost increases.
In the end, one can hardly blame the insurance companies for increasing insurance premiums. The additional coverage required by ObamaCare are expected to cost the insurance industry approximately an additional $8 billion in 2014 and over $14 billion by 2018. In total, the insurance industry will pay approximately $100 billion extra dollars to provide insurance coverage over the next 10 years.
Insurance companies are justifying the early increase in insurance premiums by noting that a number of insurance policies purchased already have coverage that extends into 2014 when additional coverage benefits become required by ObamaCare.
Technically ObamaCare will prevent those who have insurance from having to foot the bill for medical care provided to the uninsured, because one of the requirements of ObamaCare is that people are required to buy health insurance.
However, critics are concerned the requirement is not strict enough, because the penalty for not buying insurance is only $95 in 2014 and only $325 in 2015, far less than the cost of actually paying the insurance premiums to obtain required coverage. What may be worse is that people who choose to pay the penalty rather than purchase insurance and then fall ill can still opt into insurance coverage
Concerns about the relatively small penalty to individual for not abiding by the law has prompted some groups, including Blue Cross and Blue Shield, to appeal to President Obama to increase the level of the penalties.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.