Fully-Insured Health Insurer Tax Is Back for 2020

Recently released IRS notice 2019-50 has reestablished the health insurer tax (HIT) for 2020, which had been previously suspended for 2019.

The Affordable Care Act (ACA) imposes an annual, non-deductible health insurer tax on insurance companies that offer fully-insured plans and applies to all insurers offering fully-insured coverage, including plans sold via the exchange or off the exchange, individual market, large and small group fully-insured markets. The fee was included in the ACA to fund the state and federal ACA marketplaces. The fee is based on an insurer’s share of the market, which is calculated based on each insurer’s net premiums for the year. The annual fee for health insurers is assessed and paid on a calendar-year basis, using data from the preceding calendar year. Therefore, the 2020 health insurance providers fee is due September 30, 2020, based on 2019 data. Only insurance carriers are required to pay the fee. However, health insurance carriers will typically pass along the tax to their employer group clients by way of higher premiums. As a result, the increased health insurance providers fee amount will likely result in plan premium increases for 2020, adding roughly 3% to the overall premium costs. Fully-insured plan sponsors should be aware this fee may be reflected in their 2020 premiums. It is estimated that the fully-insured large group market will see annual increases of approximately $158 per person and approximately $458 per family.

There is good news! The Health Insurer Tax does not apply to self-funded plans, nor do state premium taxes levied on fully-insured health plans. Thus, if your plans are presently fully-insured, now may be a good time to re-evaluate the pricing of self-funded plans!