You may have heard in the news that the health insurance tax (HIT, known also as HIF, or health insurance fee) is back in effect for 2020 after being suspended in 2019. Check out this two-minute read to understand why this government fee could impact your group (and individual) health insurance premiums with an increase of up to 4 percent.
What is the HIT?
The HIT is an annual fee for health insurers that began in 2014 as a way to help fund the Affordable Care Act External Site (ACA). The $100+ billion sales tax applies to all insurers and is tacked on to all health care plans regardless of ACA status. Though the HIT has been in and out of effect since 2014, it has been reinstated by the federal government for 2020. Insurance carriers like Wellmark Blue Cross and Blue Shield are responsible for paying this fee to the federal government, which is then passed on to consumers through their health insurance premiums.
How does the HIT affect health insurance premiums?
The HIT fee has, on average, increased insurance premiums by 3 to 4 percent nationally during each of the years it has been in effect. In 2020, the reinstatement of the HIT will add 3.5 percent to the total average base rate increase for all Iowa and South Dakota health insurance plans. In dollars, that equates to around $400 annually for large and small group family coverage and $200 for individual plans. Nationally, these increases will be similar.
Why has the HIT been suspended in the past?
The HIT was suspended in 2019 and 2017 to help stabilize the individual market. In 2019, the suspension of HIT also effectively reduced premiums for millions of Medicare Advantage beneficiaries by 56 percent, according to a 2019 Oliver Wyman report External Site.
What is the future for the HIT?
Congress is currently considering proposals to repeal the HIT or extend the moratorium on the tax through, at least, 2021. Unfortunately, those proposals are unlikely to move before rates are finalized and implemented for 2020. Beginning Jan. 1, 2020, at renewal, you will see HIT impacting premiums. If this tax concerns you, share your opinions with your congressional leader External Site.
Questions? Please contact your authorized Wellmark Blue Cross and Blue Shield representative.