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Obamacare's Hidden Tax Hitting Taxpayers

By Dave Williamson - Feb 17, 2014 at 9:00AM

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What was intended to hit insurance companies is instead hitting state governments.

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.

David Williamson owns shares of UnitedHealth Group. The Motley Fool recommends UnitedHealth Group and WellPoint and owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
$536.60 (0.29%) $1.54
Anthem, Inc. Stock Quote
Anthem, Inc.
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WellCare Health Plans, Inc. Stock Quote
WellCare Health Plans, Inc.

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