Premium Tax In PPACA May Substantially Distort The Health Insurance Market, Undermine Competition

“Holtz-Eakin points out that this unconventional tax structure will dramatically skew the health care market in favor of non-profit providers. Insurers subject to the free will have to make up for the expense it imposes on their business somehow, either by cutting their costs or by raising their premiums. Those not subject to the fee will obviously not face this dilemma, and hence they won’t face any financial pressure to raise their premiums. However, the for-profit insurers subject to the fee will suffer the most, as their losses will be compounded by the fee’s non-deductibility. Holtz-Eakin calculates that for-profit insurers subject to the tax will have to raise their premiums by $1.54 for every $1 imposed on them by the fee just to break even.”