With More Than $20B on the Line, Insurers Push for Another Health Insurance Tax Delay

Health insurers and a coalition of business associations are ramping up efforts to repeal the health insurance tax, a provision of the Affordable Care Act that will cost insurers $14.3 billion in 2018.

Although the on-again, off-again fee has been suspended for 2019, insurers are pushing for a delay in 2020 as well. A new report (PDF) commissioned by UnitedHealth—which is hardest hit by the tax—shows insurers will be on the hook for $16 billion in 2020.

But the total impact will reach $20.3 billion, according to Tuesday’s report by Oliver Wyman. That’s because insurers can’t deduct the tax from federal tax payments. That translates to an additional $200 in annual premiums for individual ACA plans and an additional $479 for a family in the small group market.

Medicare Advantage members will see an additional $241 in premiums each year. Several groups, including the Kaiser Family Foundation, have estimated the tax adds up to 3% to premiums.

“We estimated that about 142 million consumers are in fully-insured plans that could be impacted by the tax on health insurance,” the analysts wrote.

If the health insurance tax were to continue through 2029, it would add $309 to an individual plan and as much as $700 to a family small group plan. A previous analysis (PDF) estimates individual plans will save $230 next year because of the moratorium.

Over the next 10 years, insurers would be on the hook for $260 billion if the tax remains, according to Oliver Wyman.

“The [health insurance tax] acts as a sales tax, so suspending the tax results in savings for consumers and businesses,” AHIP spokesperson Kristine Grow wrote in an email to FierceHealthcare.

But repealing or delaying the health insurance tax is an inefficient way to bring down premiums, argues Paul N. Van de Water, a senior fellow and director of policy futures at the Center on Budget Policies and Priorities. Reinsurance, for example, is a much more cost-effective approach.

“If you’re going to spend $16 or so billion to delay the tax by one more year, there are other things you could do that would have a greater effect on premiums,” he told FierceHealthcare.

In fact, Maryland just received a waiver from the Centers for Medicare & Medicaid Services to roll out a new reinsurance program, funded by a $380 million surcharge to insurers, according to The Washington Post.

And delaying the tax may not impact consumers. In a blog post last December, Van de Water said suspending the tax would “would provide a massive windfall to insurers, with little or no benefit for individual market consumers.” Moreover, it adds to the deficit because ACA subsidies would remain unaffected, potentially putting other healthcare programs at risk from lawmakers eager to cut down on federal spending.

That hasn’t stopped some groups from pressing forward with a delay. A coalition of businesses known as “Stop the HIT” has long opposed the tax designed to help offset the tax credits for ACA exchange enrollees. In a release following the Oliver Wyman analysis, the organization said suspending the tax in 2020 would provide “crucial relief to more than 14 million small business employees and their families struggling with higher insurance premiums.”

In June, the House passed a bill that includes a two-year delay to the tax. In a recent earnings call, UnitedHealth Group CEO David Wichmann said the company is advocating for a “delay or outright repeal” of the tax. This year the insurer will pay $2.6 billion as part of the fee.


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