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ACA's Health Insurance Tax (HIT) Returns for 2020

 September 30 2019     Diane Cross

Back from a suspension in 2019, the Affordable Care Act’s health insurer tax (“HIT” tax) will likely resume as of January 1, 2020.  For background, the HIT tax (also often referred to as the health insurance providers fee) began in 2014 and is an annual fee charged to certain health insurers to help fund federal and state marketplaces/exchanges.  It was suspended in 2017 and 2019 but as mentioned in IRS Notice 2019-50, “absent legislative action, the fee will resume in 2020.” The return of the HIT tax is particularly important for employers with fully insured group health plans, as it will directly impact their future rates. 

Without further repeal or delay, the HIT tax is expected to add 2% or more to the overall premium cost of fully insured plans. Estimated to be over $15.5 billion for 2020, its impact will vary as the tax is applied to health insurance companies based on their share of net premiums written nationally in the year prior.  Although it is issued to the insurer, the tax is passed-through to employers affecting the total premium cost.  

While there is no direct employer action, employers with fully insured group health plans should be aware of the HIT tax when reviewing future rate quotes from insurers so they are not caught by surprise (employers can expect to see this in there 2020 renewals). In years past, the HIT tax has either been illustrated as part of the basic rate or as a separate line item.  Please contact your HORAN representative with questions.