Skip to content
My WebMD Sign In, Sign Up

Health Care Reform:

Health Insurance & Affordable Care Act

States To Help Pay Obamacare Tax On Insurers

WebMD News from Kaiser Health News

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 Medicaid health 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.

-- Florida anticipates the tax will cost $100 million, with the state picking up $40 million and the federal government, $60 million.

-- Texas estimates the tax at $220 million, with the state paying $90 million and federal government, $130 million.

-- Tennessee anticipates it will owe $160 million, with the state paying $50 million and the federal government, $110 million.

-- California has budgeted $88 million, with the state paying $40 million and the federal government, $48 million.

-- Georgia estimates the tax on its plans at $90 million, with the state paying $29 million and the federal government, $61 million.

Calculate
Your Costs

See insurance premium
costs and financial aid.

Start Here

Health Insurance
Advisor

Find a plan that's right
for you.

Start Here

Your State's Insurance Marketplace

Get informed about plans, benefits and costs.

From WebMD
Loading …
URAC: Accredited Health Web Site TRUSTe online privacy certification HONcode Seal AdChoices