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Bipartisan Bill Suggests Another Health Insurance Tax Delay

A group of lawmakers transcending the political divide have sponsored a bill that would delay collection of the health insurance tax (HIT) until 2021.

Health insurance tax suspension

Source: Thinkstock

By Jennifer Bresnick

- Senators from both sides of the aisle have sponsored a bill that would delay implementation of the ACA’s health insurance tax (HIT) once again, this time for two years.

The $16 billion tax, designed to be levied on payers, would ultimately increase premiums and further jeopardize the affordability of healthcare, argued sponsors Jeanne Shaheen (D-NH), Cory Gardner (R-CO), Doug Jones (D-AL), John Barrasso (R-WY), Kyrsten Sinema (D-AZ) and Tim Scott (R-SC).

The succinct bill would delay the tax until December 31, 2021, giving stakeholders more time to grapple with how to keep premiums at reasonable levels.

“Patients deserve access to affordable, quality health care – full stop. Making health care coverage more affordable requires an all hands on deck approach, and suspending the health insurance tax is one component of that effort,” said Shaheen in a statement on her website.

“Congress needs to work together and reach across the aisle to address the problems affecting our health care system, and this bill is an important step forward. I’ll continue to prioritize bipartisan efforts that will decrease premiums, stabilize health insurance markets and provide quality care to every American.”

READ MORE: ACA Health Insurance Tax to Cost $16B, Lead to Higher Premiums

The HIT was first collected in 2014, targeting all payers offering health coverage on the ACA market. 

However, Congress made a bipartisan decision in 2015 to suspend the tax through 2017 due to concerns about rising premiums and market instability. 

At the time, experts estimated that the tax would contribute to an average 2.2 percent increase in prices.  Over ten years, the tax was expected to bring in more than $260 billion from payers.

In 2017, payers escaped making $13.9 billion in payments due to the moratorium, according to a 2018 analysis by Oliver Wyman, commissioned by UnitedHealth Group.  This may have saved consumers billions on their insurance coverage.

“The taxes on health insurance are non-deductible for federal tax purposes for health insurers,” the report explained.

READ MORE: CMS Relaxes Affordable Care Act Health Plan Regulations

“Therefore, for each dollar assessed and paid in taxes, more than a dollar in additional premiums must be collected (e.g. $1.54 for every $1.00 in taxes, assuming a 35 percent federal corporate income tax rate) yielding a total premium impact in 2018 of as much as $22.0 billion.”

Payers have indeed been shuffling these costs along to consumers, an addendum to the 2017 report asserted.

Oliver Wyman pointed out a noticeable drop in Medicare Advantage premiums in 2018, attributing the dip to the suspension of the 2017 tax.

In January of 2018, Congress agreed to suspect the tax once again for 2019. The Oliver Wyman researchers estimated that without the moratorium in place for plan year 2019, Medicare Advantage premiums would likely have risen by more than 55 percent. 

In some states, such as Vermont, the price of insurance would have more than quadrupled.

READ MORE: 11.8M Members Bought Health Plans Via Affordable Care Act Exchanges

Senators Barrasso, Gardner, Jones, and Shaheen warned, in a November 2018 letter to Senate leadership, that similar patterns would emerge if the tax was not suspended again.

“Unless Congress acts, insurance carriers will include re-imposition of the tax for 2020 as they begin the process of setting rates early [in 2019],” the lawmakers wrote.  “Absent further Congressional action, the tax will result in higher insurance premiums throughout insurance markets.”

The Senators added that the impact would be particularly detrimental to small business owners and seniors, both of whom would see devastating increases in the cost of insurance.

Perhaps unsurprisingly, AHIP is among the groups urging Congress to keep suspending the tax – or more favorably still, to downright repeal it.

“Allowing a tax to resume in 2020 valued at an annual level of $16 billion, would saddle individual market consumers, small businesses, state Medicaid programs, and Medicare Advantage enrollees with higher health care costs,” the payer trade group stated in a fact sheet.

“Congress has an important opportunity to provide much-needed certainty and improve the affordability of coverage for consumers by continuing to suspend the health insurance tax in 2020 and beyond.”

AHIP also expressed support for a concurrent proposal to completely repeal the tax, included in the Senate’s Jobs and Premium Protection Act, also sponsored by Senators Gardner, Barrasso, and Sinema.

“Americans have been calling for more affordable coverage and care, and this bill delivers for them,” said Matt Eyles, AHIP’s President and CEO. “Permanently repealing the Health Insurance Tax is a commonsense solution that would save billions of dollars by lowering premiums and costs for millions of families, seniors, small business owners and state governments.”

“We thank Senators Barrasso, Gardner, and Sinema for their continued leadership in promoting health care affordability and accessibility for every American. We encourage our leaders in Congress to pass this bill and fully repeal this harmful tax.”


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