Study says S.C. families pay hidden health care tax

Published May 28, 2009

By Nicole Smith, Independent Mail

 — A new report says South Carolina residents are paying on average $1,017 a year in “hidden health taxes” as part of their family health care premiums.

The hidden health tax comes in premium surcharges when families, individuals and small businesses buy health insurance, according to the report.

The surcharges help pay the uncompensated health care costs of the uninsured.

Families USA, a national nonprofit group that works to achieve affordable health care, partnered with consulting firm Milliman Inc. on the new report, which was made public Thursday.

The report says that uninsured people pay 37 percent of the costs of the care they receive, while other sources such as government and charities pay26 percent.

The remaining amount, estimated by Families USA at $42 billion in South Carolina in 2008, is shifted to the insurance agencies. Eventually those costs are passed on to the people and businesses with health insurance.

Hunter Kome, vice president of operations at Oconee County Medical Center, said that because of the economy, more people are expected to rely on charity for treatment. That could increase the costs for those with insurance.

The medical center is a private, non-governmental hospital that doesn’t receive tax money to take care of charity cases. Kome said the center provides $25 million worth of care each year to patients who need charity.

AnMed Health also provides charity care but was unable to provide estimates Thursday.

Kome said Oconee County’s unemployment rate, one of the highest in the state, is among the reasons that more people are expected to need charity care.

“What do you see though is a bit of a delay typically because people with health insurance benefits tend to be extended through Cobra insurance,” Kome said. “One of the interesting things about this particular economic slowdown is that we’ve seen a lot more furloughs and situations where plants are shutting down for a week at the time rather than actually laying off workers. I don’t know if we’ll see as big of an impact on the charity care number because of that.”

Health insurance costs are having an effect on small businesses in the state, according to Frank Knapp, Jr., president of the S.C. Small Business Chamber of Commerce.

“The small businesses are continuing to drop their health insurance because of affordability,” he said. “This hidden tax is quite detrimental in our small businesses.”

He pointed to a Wall Street Journal study done by a small-business association. According to that study, 10 percent of small businesses across the nation are considering eliminating their health coverage.

But this measure just accelerates the problem, he said, because it means that even more people won’t have insurance, which means insurance providers will increase the costs for those who are insured.

Knapp said small businesses in the state had tried cutting health care costs by increasing deductibles and co-pays and shifting a percentage of premiums to employees.

“But at some point you just can’t do it anymore,” he said. “You have to say, ‘We can’t afford it, my employees can’t afford it.’”

The Families USA report predicted that the hidden health care taxes could increase this year because of to the economy. They have already increased from $922 per family in 2005. For individuals, the “hidden taxes” in premiums average $368 a year–up from $341 in 2005, according to the report.

Knapp said people should write to members of Congress in support of health care reform.

He said Congress “is in the beginning stages of looking at health care reform, and this hidden tax is an excellent example of why we need to do something nationally. We are still being impacted by all the people around the country who don’t have health insurance …The pressure is on to come up with a solution.”

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