Healthcare insurance companies in Puerto Rico were recently forced to pay a Federal tax levied by the 2010 Federal healthcare reform known as ‘Obamacare.’
The tax is the latest Federal action to disprove the “commonwealth” party’s assertion that the territory has “fiscal autonomy.”
Party leaders say the phrase means that the Federal government cannot tax in the territory because of the Federal and territorial actions that produced the constitution of the Commonwealth government.
The tax is not the only Federal levy to have been extended to the territory but it is a large one.
Puerto Rico’s true fiscal autonomy is that the Federal government has let the territorial government enact local taxes much as it has done in the other U.S. territories. States possess the same taxing power.
The companies had to begin paying the fee last month. The levy did not take effect until this year.
It has been estimated that Puerto Rico insurers will have to pay $112 million to the Federal government this year for insurance policies that they issue in the territory.
The tax is projected to generate $158 million for the Federal government from Puerto Rico next year.
The fee was included in the Obamacare law to help pay for its costs, particularly subsidies to help middle-income individuals and families pay for healthcare insurance.
The two major provisions of the law that are benefiting Puerto Rico are to give the territory $6.412 billion from July 1, 2011 through the end of 2019.
- $5.487 billion of this effectively tripled Federal contributions to the territory’s Medicaid program to provide healthcare for low-income individuals from July 1, 2011 to September 30, 2019.
- $925 million was to help middle-income Puerto Ricans pay for private health insurance from January 1st this year until December 31st 2019, although the Commonwealth government was authorized to use the money for its Medicaid program instead if it wished. And that’s what it decided to do.
As PUERTO RICO REPORT recently revealed, however, the Commonwealth government is currently projected to use up all of the $6.412 billion by May 2018.
The government will exhaust its major Obamacare grants more than a year and a half in advance because its administration has chosen to spend the funds at a faster rate than would be required to have the monies last through the end of 2019 as intended by the federal government. The current “commonwealth” party administration further increased the spending rate this year.
Despite Obamacare’s huge increase in Medicaid funding for Puerto Rico, the Commonwealth government is still given much less assistance than States are for Medicaid. Equal funding would give Puerto Rico about $2.1 billion a year.
A State of Puerto Rico would also get an additional $1.5 billion a year for Medicaid if long-term care facilities were established in the State.
The Federal government would additionally give a State of Puerto Rico at least $1.5 billion a year to lower healthcare insurance premiums for middle-income islanders — instead of $925 million over six years.
The Obamacare tax on healthcare insurance companies is about 1.4% of their premium revenue.
Governor Alejandro Garcia Padilla’s proposal for a “commonwealth” political status option for a plebiscite provided for by a Federal law enacted in January includes an assertion that the Federal government cannot levy taxes in the territory. Previous status referenda proposals of his ‘commonwealth’ party have contained similar claims.