Health Care

The Hidden Tax in Your Health Insurance Bill

| by AFL-CIO

If you and your family have health insurance, you’re paying more than $1,000 a year in a “hidden tax” that’s part of your premium costs.

A new study by the health care advocacy group Families USA finds this $1,017 “undisclosed surcharge” is the cost of caring for the nation’s more than 46 million—and growing—uninsured.

Private health insurance premiums are higher, at least in part, because uninsured people who receive health care often cannot afford to pay the full amount themselves. The costs of this uncompensated care are shifted to those who have insurance, ultimately resulting in higher insurance premiums for businesses and families.

The study reinforces the argument that health care reform that provides comprehensive, high-quality health care to all, makes economic sense. According to “Hidden Health Tax: Americans Pay a Premium,” during 2007 and 2008, one of every three nonelderly Americans—86.7 million people—went without health insurance for some period of time. When those who do not have health insurance get sick, their first response is often to avoid or delay seeking care due to the cost.

When the uninsured do obtain care, they struggle to pay as much as they can afford. Often, however, the uninsured cannot afford to pay the entire bill, and a portion of it goes uncompensated. To make up for these uncompensated care costs, doctors and hospitals charge insurers more for the services provided to patients who do have health coverage. In turn, the costs that are shifted to insurers are passed on in the form of higher premiums to consumers and businesses that purchase health coverage.

People without health insurance received $116 billion worth of care from hospitals, doctors and other providers in 2008, according to the report. Those costs were covered as follows:

-- The uninsured paid for, on average, more than one-third (37 percent) of the total costs of the care they received out of their own pockets.

-- Third-party sources, such as government programs and charities, paid for another 26 percent of that care.

-- The remaining amount, approximately $42.7 billion in 2008, was unpaid and constituted uncompensated care.

To make up for this uncompensated care, the costs were shifted to insurers in the form of higher charges for health services. These higher charges are then passed on to families and businesses in the form of higher premiums—$1,017 for families and $368 for single people, says Ron Pollack, executive director of Families USA.

As more people join the ranks of the uninsured, the hidden health tax is growing….That tax hits America’s businesses and insured families hard in the pocketbook, and they therefore have a clear financial stake in expanding health coverage as part of health reform.