Reid 2.0: Even Higher Premium Taxes

Edmund Haislmaier /

As part of Senator Harry Reid’s indefatigable effort to make each new version of the Senate health care legislation worse than the previous one, his Manager’s Amendment restructures and expands the health insurance premium tax included in the earlier versions of the Senate bill.

The earlier versions would have imposed a flat, $6.7 billion per year, health insurance premium tax (disguised as a “fee” imposed on private health insurers), starting in 2010.

The new version uses the same mechanism, but the tax doesn’t start until 2011 and is only $2 billion that first year — but then it increases to $4 billion in 2012, $7 billion in 2013, $9 billion in the years 2014, 2015 and 2016, and eventually $10 billion for 2017 and every year thereafter.
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Perhaps, Sen. Reid is trying to diffuse the negative political impact of this new tax by delaying it a year and starting off smaller.

But by the third year, the tax is bigger than the original version ($7 billion vs. $6.7 billion) and by 2017 it reaches a permanent level of $10 billion a year. As previously noted:

This insurance premium tax would create a new, permanent federal tax that could, and likely would, be increased by Congress in future years as the growth in new government spending in the legislation outstrips the growth of revenues to fund that spending.

Turns out, it actually took exactly one month for Sen. Reid to do just that. The November 18 version of the premium tax (Reid bill 1.0 or H.R. 3950) would have raised $67 billion over the 2010-2019 ten-year budget period. The December 19 version of the tax (Reid bill 2.0, the Manager’s Amendment) will now raise $70 billion dollars over the same time period and collects that amount just nine of the ten years.

When fully implemented, a family of four can expect to pay $281 a year in additional taxes on their employer group health insurance and an elderly couple enrolled in a Medicare Advantage plan can expect to pay $407 per year in insurance premium taxes.

Just think of it as another one of the Senate’s little Christmas gifts to middle class taxpayers.