Physician Groups: Proposed Health Plan Tax Would Hamper Care Coordination, Raise Premiums

Cheryl Clark, for HealthLeaders Media , January 13, 2010

A Senate plan to tax health insurance premiums by $6.7 billion annually is a terrible idea, says a large coalition of California medical groups who fear this tax would lead to less coordinated care in fee-for-service models—and away from integrated medicine systems—while hiking premium costs for the insured.

The California Association of Physician Groups, which represents 59,000 doctors in 150 medical groups including Kaiser Permanente, is concerned because Section 9010 in the Patient Protection and Affordable Care Act (PPAC) would apply the tax only to health insurance companies, not to employers who self insure.

That's bad for California, says CAPG President Donald Crane, where 77% of the insured population is enrolled in fully insured health plans, unlike many other states where a larger portion of companies self-insure. They would bear the brunt of the tax, passed on by the health plans, he says.

California would pay at least one-third more than the average state on a per-capita basis, CAPG says. But it's also bad for any other state where most of companies' workers are fully insured, rather than self-insured, he says.

Predictably, health plans would pass the tax on to company purchasers in the form of higher premiums, which would probably be passed on again to the enrollee, says Crane.

"Our concern is that patients in California, as a result of this plan tax, would end up being migrated by their employers to self-insurance to avoid the tax," Crane says. "But self-insured insurance is almost never fee-for-service in nature, and under California law, is almost never coordinated as occurs with an HMO or an accountable care organization."

Crane's group says the reason for opposing the tax "isn't because we are trying to defend health plans. We just don't want to see our patients moved into fragmented fee for service. From a quality of care perspective, that's a backwards move. It's stupid and unfair all in the same breath."

In a letter Jan. 8 to House Speaker Nancy Pelosi, Crane wrote; "Simply put, Section 9010 of the PPAC, creating an annual tax on health insurers, is not only bad health care policy, but is certain to have a disproportionately negative impact on the State of California and its healthcare delivery system."

"Self-insured health plans are, in almost all cases, based on fee-for service payment methodologies with little, if any, coordination among providers of care. The annual tax is wholly contrary to the sound health policy principles found through the House and Senate bills which move away from fee-for-service payments and encourage care coordination," he continued.

Crane's letter also said, "The burden of this tax will ultimately fall upon businesses and families." And because self-insured companies are exempt from paying the tax, that exemption will result in "an increase in the tax burden on the remaining health plans: non-profit and for-profit, large and small, community based and national in scope."

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