The 2010 law known as Obamacare imposes an estimated $150 billion in taxes on for-profit insurers over the next decade, Milliman estimates. Employers with self-funded plans and nonprofits that specialize in Medicaid or Medicare policies, such as local hospitals, are exempt.

Weigh Benefits

The added costs need to be weighed against the benefits of the Affordable Care Act, including rules that ensure sick Americans can’t be denied insurance, said Mendelson, a former budget official in President Bill Clinton’s White House, in a phone interview. The law will expand coverage to 25 million people starting in 2016, according to congressional projections.

While the act may raise Medicaid costs, “it also means now it’s possible for a person with diabetes in this country to get insurance,” Mendelson said. “It’s not fair to look at any one of these effects in isolation.”

The tax is based on a company’s U.S. market share. It’s also expected to raise premiums by as much as 2.5 percent for employers and individuals who buy their own insurance, according to a 2011 estimate by Congress’ Joint Committee on Taxation. That would add $350 to $400 a year for the average family premium if the entire tax is passed onto consumers.

Thirty-seven states outsource at least some of their Medicaid coverage to private insurers. The industry has leverage thanks to federal rules that require states to pay “actuarially sound” fees to ensure companies can provide adequate benefits to the poor. Most states interpret that to include the cost of federal taxes.

Little Choice

That has left states little choice, said Mari Cantwell, a chief deputy director at California’s Department of Health Care Services, which runs the state’s Medicaid program.

California expects to spend $87 million on the health insurer fee in the next fiscal year, according to the department. While that’s a small portion of the $34 billion it expects to pay to Medicaid insurers, it’s still “confounding” Cantwell said in a telephone interview.

“It’s a tax on plans, but in the Medicaid world, it’s really a tax on both the state government and the federal government,” she said.