ACA Health Insurer Tax (HIT) Has Been Repealed… but What Does That Mean?

The ACA’s health insurer tax (HIT), often referred to as the “health insurance providers fee,” imposes a fee on each covered entity engaged in the business of providing health insurance. This fee began in 2014 and is used to help fund federal and state marketplaces/exchanges. The tax is applied to health insurance companies based on their share of net premiums written nationally in the year prior.

Although there was a moratorium on the fee for 2017 and a suspension on the fee for 2019, as part of the 2019 to 2020 spending bill, this tax will be repealed beginning in 2021 (for calendar years beginning after December 31, 2020). The HIT tax is assessed on insurance carriers based on their revenue; however, it has been passed on to employers, which affects premiums. The impact to group health plans has typically been between a two to four percent increase in premiums on an annual basis. Premium increases due to the tax are either reflected as part of the overall rate or shown in a separate line item depending on the insurer.

Estimations are that this tax will generate more than $15.5 billion for 2020.

Your ARC Benefit Solutions team will keep you updated on any changes affecting your premiums in the future. Contact your representative today for more info.