Under the ACA, all insurers that offer fully insured health insurance must pay an annual fee – the so-called health insurance tax (HIT). The fees are based on insurance premiums and insurers’ tax is roughly proportional to their market share. The tax was designed to help fund the federal and state marketplace exchanges. In 2018, Congress approved a one-year moratorium on collecting insurer taxes for 2019. The moratorium is set to lapse in 2020 and insurers now face an estimated $16.0 billion fee in 2020. To recoup the cost of the tax, insurers are expected to increase premiums.
Oliver Wyman Actuarial Consulting recently analyzed the projected impact of the 2019 moratorium of the HIT specific to Medicare Advantage enrollee premiums. Oliver Wyman’s analysis found that the nationwide annual premium could have increased from $393.05 in 2018 to $612.09 in 2019, or 55.7%, if the moratorium on the ACA health insurer tax was not in place for 2019. The analysis also examined how the moratorium impacted MA premiums on a state-by-state basis. A summary of the analysis is below. The full report is available here.
A September 28, 2018 CMS announcement estimated that Medicare Advantage (“MA”) annual member premiums will decrease by about 6%. Prior to that announcement, in January 2018, Congress passed H.R. 195 which placed a moratorium for 2019 on the ACA Health Insurance Tax that was originally imposed by Section 9010 of the ACA. This moratorium likely kept 2019 MA premiums lower than the level they would have been if the moratorium had not been in place.
As an addendum to its recent report on the 10-year effect of the HIT, Oliver Wyman recently estimated what the changes in MA member premiums would have been if the moratorium on ACA Insurance Tax was not in place for 2019 and MAOs were not able to make other adjustments in pricing to offset the ACA Insurance Tax.
The highlights of our findings are as follows:
- Using publicly available data, Oliver Wyman endeavoured to replicate the CMS premium estimate. Our analysis estimates a decrease in annual premiums from $393.05 in 2018 to $382.96 in 2019 (or 2.6%). The difference in member premium estimates relative to those shown by CMS in its September 28, 2018 announcement may be because CMS uses a different dataset and methodology.
- We find that national average MA member premiums may have increased by up to 55.7%, from $393.05 per year to $612.09 per year, if the moratorium on the ACA Health Insurance Tax were not in place for 2019. The impact of the HIT will apply to the 21.6 million beneficiaries currently enrolled in a Medicare Advantage plan with 19 million or 87.7% of those beneficiaries in a Medicare Advantage plan with Part D drug coverage.
- Premiums by state vary considerably, thus the increases that would have been in place without the moratorium also vary, from 15% in Michigan to 435% in Vermont.
- MA plans would have had the ability to make other changes to minimize the impact of the Health Insurance Tax, including reducing benefits (higher copays or less supplemental benefits), improving medical management activities or lowering other non-benefit costs.