Summary of Provision
Created by the Patient Protection and Affordable Care Act of 2010, the health insurance tax (HIT) is a fee on certain health insurers assessed based on market share. CBO estimated that insurers may pass this tax onto their enrollees which can result in higher premiums.16 Congress has passed moratoriums to suspend collection of the tax for calendar years 2017 and 2019. The tax will apply for calendar year 2020 without legislative action. The tax is scheduled to go into effect at a higher level – $15.5 billion in 2020 – due to yearly increases and indexation to the rate of premium growth built into the statute.17
Stakeholder Input
The Taskforce received fourteen comments regarding the health insurance tax. Senators Cory Gardner (R-CO) and Jeanne Shaheen (D-NH) advocated for congressional action to suspend the tax as soon as possible in order to prevent the cost from being passed on to consumers in the form of higher premiums. Other stakeholders supporting the repeal or suspension of the HIT included health insurers, large and small employers, employer coalitions, and a taxpayer advocacy group. Stakeholders asserted that the health insurance tax is passed on to consumers and therefore passing a suspension is a way to lower health care costs. Stakeholders cited a study estimating the impact of the health insurance tax on 2020 annual premium costs.18
Opponents of the tax claimed that the 6 percent reduction in Medicare Advantage premiums in 2019 was partly due to the moratorium on the tax. Opponents also argued that the tax has a cost to the government through increased Medicaid managed care premiums – a 2014 study estimated the cost at $38.4 billion over 10 years ($13.6 billion to state governments and $24.8 to the federal government).19 A business advocacy group discussed the disparate impact on businesses that insure through the group market versus those that are able to self-insure, and are therefore exempt from the HIT.
Stakeholders stated that the non-deductibility of the tax makes it more punitive because for every dollar assessed and paid in taxes, more than a dollar in additional premiums must be collected. Lastly, some commenters noted that a suspension of the tax for 2020 may lead to a windfall for insurers, because rates for 2020 that take into account the cost of the tax will likely have been finalized before any moratorium or repeal is enacted.
16 http://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51130-Health_Insurance_Premiums.pdf17 https://www.irs.gov/pub/irs-drop/n-19-50.pdf
18 https://health.oliverwyman.com/content/dam/oliver-wyman/blog/hls/featured-images/August18/Insurer-Fees- Report-2018.pdf
Stakeholders
The Taskforce received written and/or in-person feedback from Medicaid Health Plans America, Better Medicare Alliance, Anthem, Blue Cross Blue Shield Association, AHIP, STOP the HIT Coalition, Humana, CVS Health, Americans for Tax Reform, United Health Group, American Farm Bureau Federation, Triple-S, the U.S. Chamber of Commerce, the National Association of Manufacturers, and NFIB.
Relevant legislation
S. 172, The Health Insurance Tax Relief Act, introduced by Senators Gardner and Shaheen, would suspend the collection of the health insurance tax through the end of 2021.
28 cosponsors (23 R, 5 D).
H.R. 1398, 127 cosponsors (107 R, 20 D)
S. 80, The Jobs and Premium Protection Act, introduced by Senator Barrasso (R-WY) and Kyrsten Sinema (D-AZ), would permanently repeal the health insurance tax.
6 cosponsors (5 R, 1 D)
H.R. 2447, 6 cosponsors (3 R, 3 D)