Return of health insurance tax will hike premiums by 2.6% next year, report estimates

Tax
The return of the health insurance tax is projected to increase premiums by as much as $22 billion next year, and $267 billion from 2018 through 2017. 

The return of the Affordable Care Act’s health insurance tax—which insurers have long lobbied against—will likely increase premiums by an average of 2.6% in 2018, according to a new analysis.

The ACA’s tax on fully insured health coverage was in effect from 2014 to 2016, and its purpose was to help offset the cost of the tax credits for ACA exchange enrollees. But on late 2015, Congress passed a one-year moratorium on the tax for 2017 as part of a spending bill.

This moratorium meant $13.9 billion that would have been due this year wasn’t collected, saving policyholders an estimated 3% on their premiums, noted the analysis (PDF), which was produced by consulting firm Oliver Wyman and commissioned by UnitedHealth.

But the delay expires in 2018, and with the tax’s return, premiums are expected to rise. The firm estimates an average 2.6% increase in 2018 and rate increases of between 2.5% and 2.7% in each subsequent year through 2027.

Looking at it by market segment, the analysis stated that those projected rate hikes equate to $158-per-person premium increase in the individual market, $185 per person and $500 per family in the small-group market, $188 per individual and $540 per family in the large-group market, $245 per Medicare Advantage member and $181 per Medicaid managed care enrollee.

In total, the return of the tax is projected to increase health insurance premiums by as much as $22 billion next year, and $267 billion from 2018 through 2027. 

Executives from the country’s largest publicly traded insurers have mentioned the potential impact of the tax’s return in their recent earnings calls with investors and analysts. Anthem CEO Joseph Swedish, for example, noted during the insurer’s second-quarter call that when the moratorium is lifted, it will likely spur a 4% to 5% premium increase for ACA exchange plans. 

Unsurprisingly, the health insurance industry has continually pushed for the tax’s repeal. Indeed, a study produced by Oliver Wyman back in 2011—and commissioned by America’s Health Insurance Plans—predicted that the tax’s implementation would raise premiums. 

Now, other organizations are joining the lobbying effort against the tax. In a recent letter sent to GOP leaders in the House and Senate, 36 conservative groups and activists urged Congress to act swiftly to prevent both the health insurance tax and the medical device tax from going into effect in 2018. 

“Allowing the health insurance tax to go into effect in 2018 will directly hurt middle and low-income families,” they wrote.