Ask any employer how health care reform affects them and you'll most likely hear items such as play-or-pay or automatic enrollment, and you may even hear comparative effectiveness research fee. I bet you will not hear: health insurance provider premium tax. Makes sense, though. Providers will be responsible for paying this tax. So, why should you care about it (especially if you offer fully insured medical plans)? Here’s why:
Beginning in 2014, Section 9010 of the Patient Protection and Affordable Care Act will impose a new tax on health insurance providers. The tax is $8 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017 and $14.3 billion in 2018. The tax will continue beyond 2018 but future amounts have not been provided yet. Many providers will be affected and each provider’s tax will depend on their net premiums written during the calendar year.
I’ve always tried to stay as black and white as I can when it comes to the effects of health care reform. Given that this provision isn’t yet effective, I’ll share others’ opinions on this one:
First, in a November 30, 2009 letter to Senator Bayh providing an analysis of the impact of health care reform, the Congressional Budget Office wrote that “new fees would be imposed on providers of health insurance. ... (T)hose fees would be largely passed through to consumers in the form of higher premiums for private coverage.”
Next, according to the Joint Committee on Taxation: “For those insurance premiums that are subject to the [health insurance provider premium] fee, we estimate that the premiums, including the tax liability, would be between 2% and 2.5% greater than they otherwise would be.”
Lastly, in 2011, America’s Health Insurance Plans commissioned consulting firm Oliver Wyman to perform an analysis of how this fee might affect premiums (if the carriers decide to pass the tax on to their fully insured group health plans). Oliver Wyman estimated the tax “will increase premiums in the insured market on average by 1.9% to 2.3% in 2014,” and by 2023 “will increase premiums 2.8% to 3.7%.”
All of that said, starting in 2014 your fully insured health insurance premium renewal could have an extra 2% (or more) added on to it, representing the pass-through of this tax to you. But, there’s a flip side. On April 5, 2011, H.R. 1370 was introduced to repeal this provision. However, the bill was referred to Committee on the same day and has a 3% chance of being enacted, according to govtrack.us.
I’m not sure I would take a bet that had a 3% chance of winning. From what I hear, some fully insured employers are using this tax as the catalyst for making the decision to go self-insured.
Ed Bray, J.D., is director of benefits for a major transportation company in Hawaii.
What do you think? If implemented, do you think your provider(s) will pass part or all of their tax to your fully insured group health plan? Are you considering the effects of this fee in your benefits strategy and planning? Leave your thoughts in the comments.
