House duo’s bill targets tax used for reinsurance payments

U.S. Reps. Pat Tiberi (R-OH) and Daniel Lipinski (D-IL) introduced legislation on Thursday that would repeal Obamacare’s reinsurance fee, often called the “Belly Button Tax.”

The tax was imposed to cover the cost of the administration’s reinsurance plan, which in essence funnels payments to insurance companies to help offset higher-cost enrollees who are covered by exchange plans. The cost of the reinsurance is $25 billion. In 2014, the fee of $63 per covered individual generated $10 billion. The $15 billion shortfall must be recovered, resulting in additional costs for the U.S. group health plans.

“It’s outrageous that employers are forced to pay this punitive tax when their employees will not see a benefit,” Tiberi said. “It discourages employers from continuing to offer this vital benefit, This fee is charged per health care recipient, not policy holder, contributing to the increasing cost of health care. At a time when people have been losing the insurance they have and like, we shouldn’t enact policies that encourage employers to drop their coverage.”

Estimates indicate that nearly 70 percent of working Americans receive employment-based health insurance. Opponents have said the belly-button tax has a direct effect on access to employer-sponsored coverage because of its expense, costing employers millions of dollars last year alone. Many employers already have dropped coverage for their employees’ spouses, listing this fee as the reason.

“The majority of Americans with medical insurance purchase health care plans through their employers. The transitional reinsurance fee, the so-called ‘belly-button tax,’ would only discourage employers from continuing to offer this vital benefit to their workers,” Lipinski said. “Our bipartisan bill will protect workers from having their health care costs increased and prevent penalizing employers from having to pay millions of dollars in burdensome fees.”

This bill would eliminate the fee for the next two years and require the Government Accountability Office to conduct an investigation of how the fees received in 2014 were spent.