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'Hidden Health Tax' for Family Health Care Coverage Climbed to $1,017 in 2008
Date:5/28/2009

The 'Hidden Health Tax' is the Undisclosed Premium Surcharge that Pays for the Uncompensated Health Care Costs of the Uninsured

As More People Join the Ranks of the Uninsured, the 'Hidden Health Tax' Continues to Grow; It is Likely to be Much Higher in 2009

WASHINGTON, May 28 /PRNewswire-USNewswire/ -- The so-called "hidden health tax" for family health care coverage grew to $1,017 in 2008 according to a report released today by the consumer health organization Families USA.

The hidden health tax is the undisclosed insurance premium surcharge, paid by America's businesses and insured families, when they purchase health insurance. That surcharge subsidizes the uncompensated health care costs of the uninsured.

"As more people join the ranks of the uninsured, the hidden health tax is growing," said 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 care coverage as part of health reform."

"Reforming our health care system is not just a moral imperative -- it's an economic necessity," said Senator Max Baucus (D-Mont.), Chairman of the Senate Finance Committee. "Today 46 million uninsured Americans turn to emergency rooms when they need medical care and the cost of that care is paid for by every American with insurance. As this report shows, that hidden tax will only continue to grow unless we do something about it. That's why I'm committed to passing comprehensive health care reform this year. We must repeal this hidden tax and lift the burden from American families and businesses by ensuring quality, affordable health care for all Americans."

Families USA contracted with Milliman, Inc., a well-respected, independent actuarial consulting firm, to array and analyze the data for the report.

According to the Families USA report, "uninsured people are less likely to get the care they need when they need it, and they are more likely to delay seeking care as long as possible." When they do receive care, it is paid for in several ways:

  • More than one-third (37 percent) of that care is paid by the uninsured themselves out of their own pockets;
  • Third-party sources, such as government programs and charities, paid for another 26 percent of that care; and
  • The remaining amount, approximately $42.7 billion in 2008, is considered uncompensated care; those costs are shifted onto the health care bills of insured people, ultimately resulting in the hidden health tax through higher premiums.

Based on the Milliman, Inc. data, the uncompensated care cost in 2008 across the insured, non-Medicare, non-Medicaid population was $1,017 per insured family and $368 per insured single person.

Based on a previous Families USA report about the hidden health tax in 2005 -- using the same federal data sources used by Milliman, Inc. but arrayed by Dr. Kenneth Thorpe, Professor and Chair of the Department of Health Policy and Management at Emory University -- the hidden health tax has grown: for family health coverage it grew from $922 to $1,017 and for individual coverage it grew from $341 to $368.

"Due to the economic downturn, more and more people are losing their jobs and their health care coverage," said Pollack. "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."

"This new Families USA report shows why all Americans will benefit from health care reform and should push stakeholders to make health insurance work for everyone as soon as possible," said Ronald A. Williams, Chairman and CEO of Aetna Inc. "Covering the uninsured will lighten the burden of the hidden tax on those who have coverage today," he continued. "While doing so, we also must focus on other reforms to improve value and quality in health care."

"This research shows that the market in which we buy our healthcare is filled with cross-subsidies, making it dysfunctional and unsustainable," said Dan Danner, president and CEO, National Federation of Independent Business. "Until individuals understand how much they are really paying for their healthcare, costs cannot be brought under control. Until costs are addressed, we will continue to struggle with coverage."

The data for the report were based on the federal Medical Expenditures Panel Survey as well as other federal and private data sources. For a full description of the methodology used to array the numbers in the report, see the Technical Appendix to the report.

Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan, and its mission is to secure high-quality, affordable health coverage and care for all Americans.


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SOURCE Families USA
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