'Hidden Health Tax' Costs U.S. Families $1k a Year

John Commins, for HealthLeaders Media , May 29, 2009

The "hidden health tax"–a surcharge on family health coverage paid each year by employees and businesses to subsidize uncompensated care–grew to $1,017 in 2008, while the cost for insured individuals grew to $368, according to a report released by Families USA today.

"As more people join the ranks of the uninsured, the hidden health tax is growing," says Ron Pollack, executive director of Families USA. "That tax hits America's businesses and insured families hard in the pocketbook, and they therefore have a clear financial stake in expanding health coverage as part of health reform."

The report says uninsured people are more likely to delay care as long as possible, which generally aggravates their illnesses. When they eventually receive care: 37% of that care is paid for by the uninsured out of their own pockets; third-party sources, such as government programs and charities, paid for another 26%; and the remaining amount, approximately $42.7 billion in 2008, is considered uncompensated care that is shifted to the insured in the form of higher premiums.

America's Health Insurance Plans endorsed the findings and says it underscores the need for universal healthcare coverage. "This is a very important study showing the hidden tax that uncompensated care puts on consumers and employers and it highlights why it's so important that we address healthcare reform this year," says AHIP spokesman Robert Zirkelbach. "The most expensive thing we could do is nothing at all because our healthcare costs are rising at unsustainable rates. This report shows that we are spending a significant amount of money to provide care for people who don't have health insurance and we are doing it in the most expensive way possible–which is through the doors of the emergency room."

Families USA contracted with the actuarial firm Milliman, Inc. to analyze the data for the report.

A previous Families USA report for 2005 put the hidden tax on family health coverage at $922 annually, and $341 for individuals.

Pollack says it could get worse this year because of the recession. "More and more people are losing their jobs and their health coverage. As a result, it is highly likely that the hidden health tax for 2009, which is not yet known, will be considerably higher than the $1,017 amount experienced in 2008," he says.

John Commins is a senior editor with HealthLeaders Media.

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