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    WebMD News from Kaiser Health News

    States To Help Pay Obamacare Tax On Insurers

    By Phil Galewitz

    Wed, Aug 27 2014

    When Congress passed the Affordable Care Act, it required health insurers, hospitals, device makers and pharmaceutical companies to share in the cost because they would get a windfall of new, paying customers.

    But with an $8 billion tax on insurers due Sept. 30 -- the first time the new tax is being collected -- the industry is getting help from an unlikely source: taxpayers.

    States and the federal government will spend at least $700 million this year to pay the tax for their Medicaidhealth plans. The three dozen states that use Medicaid managed care plans will give those insurers more money to cover the new expense. Many of those states – such as Florida, Louisiana and Tennessee – did not expand Medicaid as the law allows, and in the process turned down billions in new federal dollars.

    Other insurers are getting some help paying the tax as well. Private insurers are passing the tax onto policyholders in the form of higher premiums. Medicare health plans are getting the tax covered by the federal government via higher reimbursement.

    State Medicaid agencies say they have little choice but to pay the tax for health plans they hire to insure their poorest residents. That’s because the tax is part of the health plans’ costs of doing business. Federal law requires states to pay the companies adequate rates.

    “This situation results in the federal government taxing itself and taxing state governments to fund the higher Medicaid managed care payments required to fund the ACA health insurer fee,” said a report by Medicaid Health Plans of America, a trade group.

    Meanwhile, many Medicaid managed care companies have seen their share prices – and profits -- soar this year as they gained thousands of new customers through the health law in states the expanded Medicaid. Over half of the 66 million people on Medicaid are enrolled in a managed care plans.

    A KHN survey of some large state Medicaid programs found the tax will be costly this year. The estimates are based in part on number of Medicaid health plan enrollees in each state and how much they are paid in premiums. States split the cost of Medicaid with the federal government, with the federal government paying on average about 57 percent.

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