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Concern over insurance tax arises with ObamaCare launch

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New Year's Day marks the start of coverage under ObamaCare for millions of people -- but it also marks the start of a massive tax increase which could further inflate premiums.

Beginning Wednesday, the Affordable Care Act imposes an annual fee on health insurers. The fee is projected to bring in $8 billion next year and roughly $100 billion over the next decade, making it one of the biggest under the law.

The health insurance industry has been howling about the "tax" for years, and is trying to rally support for a bill in Congress that would repeal it. The bill, sponsored by Rep. Charles Boustany, R-La., has 229 co-sponsors -- which represents a majority of members in the House.

But the White House will fight any effort to repeal it, and for now the measure is in effect.

On Tuesday, America's Health Insurance Plans President Karen Ignagni warned that the fee will end up hitting consumers in the form of higher premiums.

"Taxing health insurance makes it more expensive and that undermines the goals of health care reform," she said.

The health care overhaul impacts what people pay for health insurance on the individual market in a host of ways.

For some, premiums will rise, but they'll be eligible for subsidies to offset the cost, ultimately bringing down their health care tab. Others, who make too much to qualify for subsidies, will see their health care costs rise. The impact will vary depending on the state, the level of coverage sought and other factors.

Some premiums were already on the rise, in part because insurance companies are being required to cover high-cost patients and offer more benefits; and in part because premiums have been rising for years.

But insurance companies are also expected to raise rates this year and beyond to offset the cost of the insurance industry fee.

An industry-commissioned study by consultant Oliver Wyman estimated that rates will rise in 2014 by up to 2.3 percent for that reason alone. By 2023, the study said, rates could be rising annually by up to 3.7 percent because of the tax.

Such hikes would only increase the strain on individuals and businesses trying to comply with the law's mandate to buy, or provide, insurance -- which, for individuals, kicks in at the end of March.

The primary X factor in 2014 will be enrollment. If droves of young, healthy Americans comply with the mandate and sign up for coverage by the March 31 deadline, it will reduce the need for insurance companies to jack up their rates.

The Obama administration says enrollment has picked up considerably overall since the rocky debut of HealthCare.gov and various state-based exchange sites. At last count, officials said Tuesday more than 2 million people had signed up through the federal and state sites.

But whether the young and healthy will rush in remains an open question. And the administration faces serious political headwinds, including from lawmakers pushing to chip away at the law's various mandates and fees.

Some lawmakers voiced skepticism that the boosted enrollment numbers signal a turnaround for the law. Republicans on the House Energy and Commerce Committee predicted "rate shock" in 2014.

For more information on healthcare plans visit HealthCare.gov.

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