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Bill Introduced To Repeal Obamacare's 'Belly Button' Tax

by Mike Godfrey, Tax-News.com, Washington

19 November 2013


Pat Tiberi (R – Ohio), Chairman of the Subcommittee on Select Revenue Measures, and Daniel Lipinksi (D – Illinois) have introduced a bipartisan bill into the House of Representatives that would repeal the United States health care law's reinsurance fee, often known as the "belly button tax."

Set to be introduced in 2014, the tax is intended to cover the federal reinsurance program, which provides payments to insurance companies to help offset the universal application of the Affordable Care Act. Its revenue goes into a fund to compensate insurance carriers who end up paying bigger medical bills for new high-risk customers who buy on the government exchanges.

The USD63 levy covers every health insurance recipient, and is expected to affect 190m Americans. The three-year reinsurance program is funded at USD25bn – USD12bn in 2014, USD8bn in 2015 and USD5bn in 2016.

"This covers every health insurance recipient, not just the policy holder. It's a fee faced by every one that provides health insurance and they will most certainly pass on the cost to their employees and customers when they can," said Tiberi. "It's simply outrageous that employers will be forced to pay the tax while they will get nothing in return from the program."

"The majority of Americans with medical insurance purchase healthcare plans through their employers. The transitional reinsurance fee, the so-called 'belly-button tax,' would only discourage employers from continuing to offer this vital benefit to their workers," Lipinski added. "Our bipartisan bill will protect workers from having their healthcare costs increased and prevent penalizing employers from having to pay millions of dollars in burdensome fees."

While employers are the largest source of health insurance coverage in the US, it is expected that the levy will have a negative impact on access to health care. The tax is being seen to have serious implications on decisions to offer employer-sponsored coverage, costing many employers millions of dollars in the future. In fact, some employers are cited as having already dropped health coverage for some spouses, citing this levy as a reason.

While the Administration has itself recognized the negative effects of this tax, and the Department of Health and Human Services has announced its intention to propose an exemption from the fee for "certain self-insured, self-administered plans" for the 2015 and 2016 benefit years, it has been indicated that employers have voiced concern over the narrow-scope of the exemption, since many plans are administered by third-parties.

"The Administration's intention is too little, too late. A delay or exemption does not change the fact that the overwhelming majority of employers will still have to pay this tax. … We need to provide stability and security, not provide another incentive for employers to discontinue their coverage," Tiberi concluded.

The bill has received support from labor unions, large employers and small businesses, including the American Benefits Council, Corporate Health Care Coalition, National Retail Federation, the Business Roundtable and the National Association of Manufacturers.

TAGS: tax | business | law | insurance | fees | Health tax | health care | legislation | United States

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