Congress’ recent decision to suspend an Obamacare fee levied on health insurers could lower insurance rates for Connecticut companies and their employees next year, experts say.
Get Instant Access to This Article
Subscribe to Hartford Business Journal and get immediate access to all of our subscriber-only content and much more.
- Critical Hartford and Connecticut business news updated daily.
- Immediate access to all subscriber-only content on our website.
- Bi-weekly print or digital editions of our award-winning publication.
- Special bonus issues like the Hartford Book of Lists.
- Exclusive ticket prize draws for our in-person events.
Click here to purchase a paywall bypass link for this article.
Congress' recent decision to suspend an Obamacare fee levied on health insurers could lower insurance rates for Connecticut companies and their employees next year, experts say.
In December, Congress passed a federal budget that included a one-year moratorium on $13.9 billion worth of so-called health insurance provider (HIP) fees that were to be paid by insurers in 2017.
The fees have been levied since 2014 to help fund health insurance coverage subsidies for individuals who fall beneath certain income thresholds.
The federal spending bill, which also included two-year delays of the impending Cadillac tax on high-value health plans and the existing 2.3 percent tax on medical device manufacturers, represented one of the most significant changes to Obamacare since it was passed in 2010.
Connecticut insurers have included HIP fees in their rates since they took effect in 2014, but those costs can't be included in plans active any time in 2017. That means any annual policies that took effect after Jan. 1, 2016, will be impacted.
What will savings be?
“We are anticipating the rates will decrease because the fee is being removed for the overlap months into 2017,” said Paul Lombardo, insurance actuary at the state Insurance Department, which oversees health insurer rate requests. “We view it as a positive for small and large employers in the state.”
It's not clear how much savings employers might reap, but an insurance industry commissioned study said the fees in 2017 would add as much as 3.7 percent to the average annual premium, or $270 and $250, respectively, to small- and large-group plans.
The study by Oliver Wyman, commissioned by America's Health Insurance Plans, also said the HIP fee would increase small employer plan costs in Connecticut by an average of $302 per year over a decade, while large employer plans would see an average price increase of $283 over that time.
AHIP has advocated for a full repeal of the fee.
“The health insurance tax drives up the cost of coverage for millions of Americans,” AHIP spokeswoman Clare Krusing said in a statement before the December vote. “Repealing or suspending this tax would be a victory for seniors, small business owners, and middle-class consumers.”
Affects renewals in 2016
The fee moratorium will affect any annual employer health plans renewed after Jan. 1, 2016, because they will extend into 2017.
As a result, the state Insurance Department has ordered small- and large-group insurers to recalculate any 2017 rates that were approved prior to Congress' HIP fee suspension in December.
Employers who have already begun paying premiums on a policy that took effect after Jan. 1 and included the HIP fee in its pricing will receive a credit from their insurer, Lombardo said. There are about 16 plans currently in effect that fall into that category.
Of course, elimination of the HIP fee doesn't mean employers looking to renew their health plans in 2017 are guaranteed to see an overall cost decline. Many factors, from utilization trends to drug costs, affect rate calculations. Insurers will file rate requests this spring for plans that begin in 2017.
Cost to insurers
The IRS is charged with calculating the HIP fees each year, which are based on prior-year share of all health insurance premiums written.
Hartford-based Aetna paid $856 million in HIP fees in 2015, and $605 million in 2014, according to its recent annual report. It's not clear what the insurer would have owed in 2017.
“Aetna is working through the details and filings so that we can comply with the Insurance Department's [refiling request],” spokesman Walt Cherniak said via email.
While some have criticized the HIP fee for driving up insurance premiums, they did help offset the costs of expanding insurance to millions of Americans. Critics have also said the moratorium will add to the federal deficit.
Meantime, there have been questions over the fee calculations.
The Treasury Inspector General for Tax Administration issued a report last year that found the IRS may not be allocating the fee properly, because some insurers failed to file their market-share data on time, allowing them to avoid paying their fair share of the overall fee.
Read more
