D.C. Council introduces new tax in order to mitigate financial blow of failed insurance exchange
The D.C. Council has approved a new tax that will be placed on all health insurance products that are sold throughout the district. The tax is meant to resolve a specific issue: The financial problems that have been caused by the district’s insurance exchange. The exchange was meant to provide D.C. residents with access to affordable insurance coverage, but it proved quite difficult for these residents to access the exchange due to severe technical difficulties.
1% tax to be placed on the $250 million in insurance premiums consumers pay annually
The new tax is taking effect on an emergency basis, which means that it will be implemented immediately. The measure will place a 1% tax on more than $250 million in insurance premiums that are paid each year by D.C. residents. The tax will eventually be placed under congressional review so that lawmakers can determine its necessity, but the measure is expected to help fund the insurance exchange’s operation costs for the time being.
Costs incurred by insurers may be passed on to consumers
All health-related insurance products will be subject to the new tax. Insurers have warned that the costs they face from the new tax will be transferred to consumers. As insurance companies face higher costs from new regulations and taxes, they must find ways to keep themselves financially secure, as they are directed to do by federal law. In order to remain solvent, insurers sometimes raise premiums as they cannot rely solely on investments and other business dealings.
Some exchanges have failed to severely that they need to be rebuilt from the ground up
Insurance exchanges throughout the U.S. have been crippled by faulty technology that has put them on the verge of utter collapse. Some states are taking steps to completely rebuild their exchanges in order to better prepare themselves for another open enrollment period that will begin later this year. Other states are allowing the federal government to take over their exchanges, keen to avoid any further complications regarding developing a working exchange themselves.