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Obamacare's Hidden Tax Hitting Taxpayers

File this story under "when good intentions go awry." When creating the Affordable Care Act, Congress thought insurance companies, set to profit from the expansion of Medicaid to millions of additional Americans, should pay a tax for their new-found customers. And so, a revenue collection tool was born set to bring in $150 billion over 10 years.

However, this tax is more burdensome to the insurance companies than initially thought. Instead of paying it themselves or passing it on to consumers, where premiums would rise by hundreds of dollars, creating a public outcry of price gouging, they are instead negotiating with state governments. By arguing successfully, the insurance industry will successfully have the fee paid indirectly by the American taxpayer.

It's not just large insurers like WellPoint and UnitedHealth, but also smaller Medicaid-focused companies like WellCare that are openly discussing on recent conference calls their efforts to shift the burden.

In this video, health-care analyst David Williamson discusses this hidden Obamacare tax, why insurance companies are aggressively courting state governments, and why this practice, while distasteful for some, is critically important to watch for investors in the industry.

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Read/Post Comments (26) | Recommend This Article (7)

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  • Report this Comment On February 17, 2014, at 9:20 AM, i9o0cvfe4r wrote:

    The writer of this article is on Obama apologist. There are no "good intentions" regarding this tax, and only an idiot would think that it would not be "burdensome."

    Obama supporters will go hysterical over this well sourced list of 557 examples of his lying, lawbreaking, corruption, cronyism, etc.

  • Report this Comment On February 17, 2014, at 9:45 AM, NotFondOfLibs wrote:

    Well, there you are. More evidence that the ACA (affordable? not hardly) is the worst bill in American history.

  • Report this Comment On February 17, 2014, at 9:50 AM, sabebrush6 wrote:

    OBAMACARE - or as it's becoming known as the UCA - Unaffordable Care Act. oh yeah, it's a good thing, huh. WRONG!

    What a POS that's coming to light.

  • Report this Comment On February 17, 2014, at 9:51 AM, REALDEAL wrote:

    Everything he has done in office has a lot of collateral damage attached to it . When your a stupid liar and full of your own self this is what happens. When you have an idea Obozo let it go, we would gladly appreciate it.

  • Report this Comment On February 17, 2014, at 10:00 AM, sogole wrote:

    America has no more money to pay these additional taxes.

  • Report this Comment On February 17, 2014, at 10:08 AM, PaulSell wrote:

    When asked specifically about the hidden taxes and the obvious "cooking of the books" on OB☭M☭C☭RE ● enrollment numbers, Kathleen smiled and said, "Pull my finger." When the exact question was also posed to Barry, he tucked in his chin and gave a big toothy smile and said, "I just love that Yahoo picture of me with the Great Seal behind my pointy head, that looks like a halo on me. In addition I just want you all to know, "I have a Bic Pen and an Obamaphone."

    Republicans are now just waiting for Barry & Company to work the kinks out of his legacy legislation OB☭M☭C☭RE●! After all this isn't just more of your Dear Leader's shuck and jive stuff, this is about millions of people's lives. The Republicans have promised to get right on immigration, as soon as

    OB☭M☭C☭RE● smoothes out with the millions of lives it has disrupted. Barry was quoted as saying, "When I go out and say the, "You like it you can keep it's... for years and still just as recently as the SOTU, constantly fudge my numbers and get 4 Pinocchios from the Washington Post the next day for it, I JUST CAN NOT UNDERSTAND WHY "YOU PEOPLE" STILL DON'T BELIEVE MY SHUCK & JIVE SH!T ANYMORE? I know you're all struggling and I want you to just reflect back to Christmas. It only cost you tax paying suckas' $800,000 to bring my main squeeze "Snuff Lip" back from her extended stay in Hawaii. Now, for you millennials: "Welcome to YOUR OB☭M☭C☭RE●! The Liberals, that now have to survive re-election with this albatross hanging around their socialist necks, STILL have to convince you soft headed millennials into another suicide vote for them again. Maybe we, Barry & Company, can just chat up Pot Legalization, minimum wage increase, and Income Inequality, while carefully avoiding your slim to none chances at even getting a job. We Dems are still just going to encourage you boneheads into believing that the lying Dems are actually going to make your lives so much better."

    OB☭M☭C☭RE ● NOW has DEATH SPIRAL written all over it. I do hope the Republicans are meeting with Insurance Companies, as I write, figuring out how to defuse this Economic time bomb, when they regain the Senate in 2014 with their new plan.

  • Report this Comment On February 17, 2014, at 10:19 AM, cupera1 wrote:

    The new taxes, which cost more than $675 billion over the next decade, include:

    • A 2.3 percent excise tax on U.S. sales of medical devices that’s already devastating the medical supply industry and its work force.

    The levy, which took effect Jan. 1, 2013, is a $20 billion blow to an industry that employs more than 360,000 working in plants across the U.S.

    Several major manufacturers have been impacted, including:

    • Stryker Corp. of Michigan, which blames the tax for 1,000 layoffs.

    • Indiana-based Zimmer Corp., which cites the tax in laying off 450 and taking a $50 million charge against earnings.

    • Indiana-based Cook Medical Inc., which has scrubbed plans to open a new U.S. factory each year.

    • Boston Scientific Corp., which has opted to open plants in tax-friendlier China and Ireland to help offset a $100 million charge against earnings.

    • Minnesota-based Medtronic Inc., which expects an annual charge against earnings of $175 million.

    • A $50,000 excise tax on charitable hospitals that fail to meet new “community health assessment needs,” “financial assistance” and other rules set by the Health and Human Services Department (took effect in 2010).

    • A 3.8 percent surtax on investment income from capital gains and dividends that applies to single filers earning more than $200,000 and married couples filing jointly earning more than $250,000 (took effect Jan. 1, 2013).

    • A $24 billion tax on the paper industry to control a pollutant known as black liquor (took effect in 2010).

    • A $2.3 billion-a-year tax on innovator drug companies (took effect in 2010).

    • A 10 percent excise tax on Americans using indoor tanning salons (took effect July 1, 2010).

    • An $87 billion hike in Medicaid payroll taxes for employees, as well as the self-employed (took effect Jan. 1, 2013).

    • A hike in the threshold for writing off medical expenses to 10 percent of adjusted gross income from 7.5 percent (took effect Jan. 1, 2013.).

    • A new cap on flexible spending accounts of $2,500 a year (took effect Jan. 1, 2013).

    • Elimination of the tax deduction for employer-provided prescription drug coverage for Medicaid recipients (took effect Jan. 1, 2013).

    • An income surtax of 1 percent of adjusted gross income, rising to 2.5 percent by 2016, on individuals who refuse to go along with Obamacare by buying a policy not approved by the government (took effect Jan. 1, 2013).

    • A $2,000 tax charged to employers with 50 or more workers for every full-time worker not offered health coverage (delayed).

    • A $60 billion tax on health insurers (effective Jan. 1, 2014).

    • A 40 percent excise tax on so-called Cadillac, or higher cost, health insurance plans (goes into effect Jan. 1, 2018).

  • Report this Comment On February 17, 2014, at 10:59 AM, lvrjck wrote:

    Thank You Mr Obummer and all the dems that voted for this. Great job give yourself a pat on the back. In 2014 we the people will show you how we really feel .

  • Report this Comment On February 17, 2014, at 11:05 AM, GuitarJim wrote:

    I sympathize with the insurance company actuaries. They were charged with trying to set premiums at rates that would ensure that benefit payments were at least 80% of revenues, with enough left over to pay operating costs and a little profit. They had to do this based on numbers they were given from various government agencies. Those numbers turned out to be grossly overly optimistic. Now the insurance companies are facing huge losses unless then government makes good on those risk corridor reimbursement payments.

    Insurance company actuaries are going to take another shot at it before open enrollment this year, only this time they'll have a combination of their own experience this year and more bogus numbers from the government. Unfortunately, those premiums won't get them much closer to their target revenues because they'll underestimate the number who will "opt out" (in the words of Chief Justice Roberts) because of the higher rates. Once again, the insurance companies will need their losses covered by risk corridor payments.

    Those risk corridor payments end in a few years. After that, insurance companies are going to have to either charge enough to make a profit, or go out of business. Charging enough to make a profit will only chase more people out of the market, which will further increase the minimum premiums needed to make a profit, and so on.

    The death spiral has begun...

  • Report this Comment On February 17, 2014, at 11:19 AM, hargen wrote:

    The author of the article thinks we should, "File this story under "when good intentions go awry." I think I'll file the story under, "When idiot politicians pass laws without reading them" (you have to pass the bill to know what is in the bill...ha ha ha, all the fools laughed (except the Motley ones".

  • Report this Comment On February 17, 2014, at 11:25 AM, rcotter888 wrote:

    Is anyone getting sick yet of hearing how all these catastrophes are simply `unintended consequences'? You can't have it both ways. Either Obama is the dumbest ever, or he really meant what he said when he promised to make `fundamental changes' to America. What do those idiot dems think `fundamental' means? I'd tell them to look it up, but one has to know how to use a dictionary to do that.

  • Report this Comment On February 17, 2014, at 11:59 AM, slopestyle wrote:

    Several comments have noted the additional taxes imposed by the ACA. The Democrats have never understood that corporations do not pay taxes…their customers do as through the cost of the products. Next time you need a medical device such as a blood pressure gage or an insulin pump you are paying this tax.

  • Report this Comment On February 17, 2014, at 12:06 PM, wfo75080 wrote:

    I believe the author of this article needs to clarify that it wasn't jut Congress that "Created" Obamacare but the Democrats, (100%). This is a TAX put in place by the Democrats ONLY!

  • Report this Comment On February 17, 2014, at 12:53 PM, Lovesmusic wrote:

    Isn't it interesting that Insurers/Democrats think they can fool American citizens by rather than obviously raising premiums (which they will do anyway), they try to come in the back door and get their big bucks from "state" taxes? Our states are financing Obamacare through the roof with our hard earned taxpayer dollars while education and infrastructure crumble. Insurers certainly cannot transfer any loss of dollars to their stockholders so our poor states may pay the bill again. Thanks Obama/Democrats for destroying not only our healthcare system but now also erode away our limited states budgets. Nov. cannot come soon enough...

  • Report this Comment On February 17, 2014, at 12:55 PM, ceh4702 wrote:

    Any time the government gets involved with anything the cost of that increases. Government is the problem, not the solution. For every dollar a citizen receives the government is wasting 2. Cant fix stupid.

  • Report this Comment On February 17, 2014, at 12:58 PM, ceh4702 wrote:

    I went to the government website for insurance and if I wanted to get my wife healthcare, it would cost me over $300 a month and then there would be a deductible of around $17K. That is the same as having no insurance and paying for it.

  • Report this Comment On February 17, 2014, at 1:29 PM, spcatherall wrote:

    This is clearly NOT a case of "good intentions gone awry" because Obama has already unconstitutionally delayed or rescinded those provisions of the law that did not meet his intentions. Clearly Obama, Reid and the other liberal Dems wanted this burden on the American people.

  • Report this Comment On February 17, 2014, at 2:15 PM, JePonce wrote:

    Government greed for the citizens power and wealth is insatiable.

    In 2013, Local, Stat and Federal governments sucked $6.966 Trillion for U.S. private sector capital using direct and indirect taxes, and increasing taxpayer debt. That equates to 46.35%, and leaves behind in the private sector 23.65% for the citizens and 24.27% for corporations and business;'. They Leftist's whine that trickle down economics does not work. They are correct, far too much trickles up the coffers of greedy politicians.

    We are no longer constituents in the eye's of politicians,. We are meal tickets.

    Vladimir Lenin said, "There are no morals in politics."

    He may have been evil, but he was far from stupid.

  • Report this Comment On February 17, 2014, at 2:16 PM, thomaskanary wrote:

    You get what you voted for.

  • Report this Comment On February 17, 2014, at 3:01 PM, grumpyoldman wrote:

    Obama has added more taxes in five years than almost any other president in history, no not income tax but other taxes. His promise to NOT raise taxes end on his first day in office when he raised the taxes on cigarettes.

  • Report this Comment On February 17, 2014, at 3:41 PM, doc09211948 wrote:

    Let the government mind their own business. Most of the time when they stick their nose into something it costs the taxpayers more money and provides more give away programs. This country is becoming more socialistic and that's not what this country is all about

  • Report this Comment On February 17, 2014, at 8:31 PM, avanelle wrote:

    i have seen several people on tv in the last week complaining like crazy about president obama lying about obamacare and all of them voted for our first communist president. cry, you deserve obamacare and all its liers.

  • Report this Comment On February 18, 2014, at 9:31 AM, Veritas177 wrote:

    Of course the taxes are getting shifted. Corporate taxes are always pass through- if you tax the pig farmer, you tax the price of pork chops. Only an idiot would try to make healthcare more "affordable" by taxing healthcare providers.

  • Report this Comment On February 18, 2014, at 3:05 PM, frk1099 wrote:

    What ELSE should congress pass before reading it??????

  • Report this Comment On February 18, 2014, at 5:24 PM, thumber wrote:

    It has been reported by, of all news channels, CNN that some restaurant owners are adding a 3% surcharge to all customers bills to pay for their employees additional health care costs resulting from from the additional increases created by Obamacare. They did this to avoid having to reduce hours or lay people off. So now customers (you and me) will be paying for our coverage and theirs, plus the poverty level peoples coverage as well. Just think what will happen if minimum wage goes up to $10.00 or more an hour.

  • Report this Comment On February 19, 2014, at 6:10 AM, Poewebb wrote:

    So I went to do my taxes and was told that as of 2015 if you DO NOT HAVE MEDICAL INSURANCE you will pay a fine of 470.00 and in 2016 it will be over $ 700.00 and in 2017 a whopping $ 2000.00 + . I guess our government plans on collecting the extra money that we paid in and are confident that the people that should have the right as americans to choose whether or not to have it or people that can't afford it .Wow ,what a way to treat your people that employ you, our elected officials,we are the ones that have been gracious enough to give you the job that you hold and to have you do this to us is an insult. I'm a appalled by the way you treat my fellow Americans and I would say your fellow americans but there is no way that you're any part of America ....

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David Williamson

The Motley Fool's Healthcare Analyst, I specialize in Pharma, Biotech, and how the ACA (Obamacare) is changing the business of healthcare in America. Follow me on Twitter for breaking stock news, policy thoughts, and misc musings...

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