In September, the IRS published a notice indicating the Health Insurance Tax (HIT), which is mandated by the Affordable Care Act, would be back in effect in 2020. The HIT was active from 2014 through 2016, and again in 2018, with reprieves in 2017 and 2019. The tax is applied to individual policies, small groups, employers that are not self-insured, Medicaid managed care, Medicare Part D, and Medicare Advantage. According to the Centers for Medicare and Medicaid Services’ (CMS) new 2020 payment rule, the HIT is set to generate $15.5 billion in taxes, which is a fixed fee.
The HIT penalizes employers who responsibly provide health care coverage to their employees because the tax is calculated on insurance premiums paid for by employers. Additionally, under CMS’ 2020 payment rule, premium growth will now include individual health insurance market premium growth in addition to the amount employers spend per enrollee on their plans. Responsible employers, who merely wish to provide valued employees with insurance coverage, will be punished with the tax. Employees will then be left holding the bag when their personal premiums increase to cover the tax’s blowback.
The implementation of the HIT remains under fire by bipartisan opponents of the tax. The Better Medicare Alliance is urging Congress to suspend the 2020 tax and stated, “Repeal of the HIT would prevent the increase in the cost of health coverage and preserve access to valued care for seniors, the disabled, and low-income beneficiaries in Medicare Advantage.” Additionally, Ami Bera (D-CA) introduced the Health Insurance Tax Relief Act in the House of Representatives aiming to delay the annual fee until 2022 and the proposed legislation has received bipartisan support.
CalChamber opposes the HIT and remains committed to ensuring stability and reliability in relation to health insurance premiums. The HIT will vanquish this stability and cause already escalating premiums to continue trending upward.