An onerous provision of Obamacare — the so-called Affordable Care Act — was delayed until 2018, but it’s about to hit with a nearly 3 percent tax on health insurance plans.
Alaska is one of the states that will get hit the hardest by the “health insurance tax,” known aptly as the “HIT.”
Premiums in Alaska are expected to increase by between $300 and $500 per insured individual per year in 2018 as a result, and even more in later years.
WHAT’S THE BACKGROUND?
Under Obamacare, every insurer that offers fully insured health insurance must pay what the federal government calls the health insurance provider tax.
The tax is supposed to fund the now nearly monopolistic health care markets, or “exchanges,” as the federal government calls them, although there are so few providers that the term “exchange” is euphemistic at best.
The exchange in Alaska is just Premera Blue Cross and it serves individuals and families who are not covered by an employer plan, Medicaid, or Medicare. Up to 18,000 Alaskans are covered by this insurance company, as Obamacare also levies tax penalties on those who don’t purchase coverage.
In 2017, Congress approved a one-year delay on collecting the HIT tax, but that delay expires on Dec. 31.
WHAT HAPPENS IN JANUARY?
If Congress does not eliminate the HIT, people buying insurance will see pass-through costs that will raise their rates. Premiums will increase by about 2.7 percent in 2018, and every year after that will go up between 2.6 and 2.8 percent.
Over 10 years, this will mean premiums will increase over $5,000 per person in Alaska’s individual market, to over $7,000 per family. Also, Medicare Advantage members will see their costs go up by over $3,000 and Medicaid enrollee’s costs will increase by a similar amount, which varies state to state. That latter increase gets passed along to taxpayers, not to Medicaid enrollees.
The tax will raise $14.3 billion for the federal government so it can run the federal health care exchange.
- The tax burden’s impact on insurance premiums for small employers that are fully insured will be enormous, while self-insured companies and State of Alaska employee plans will not be required to pay the tax.
- More younger and healthier people may simply avoid purchasing health insurance, which will destabilize rates as more of the insured pools will be made up of sicker people.
- The health insurance tax also applies to Medicare Advantage, Medicare Part D, and Medicaid Managed Care.
In Alaska insurance rates will climb in 2018:
- Single: $386 per year
- Small group single: $263 per year
- Small group family: $632 per year
- Large group single: $238 per year
- Large group family: $661 per year
- Medicare Advantage: $269 per year
- Medicare PDP: $21 per year
By 2027, this will result in total increases to Alaskans:
- Single: $5,554
- Small group single: $3,257
- Small group family: $7,820
- Large group single: $2,945
- Large group family: $8,179
- Medicare Advantage: $3,321
- Medicare PDP: $266
(Source: Oliver Wyman analysis and report commissioned by United Health Care)
WHO DOESN’T PAY THE TAX
According to the IRS, the following entities are exempt from paying the HIT:
- A self-insured employer
- A governmental entity
- Certain nonprofit corporations
- Certain voluntary employees’ beneficiary associations (VEBAs)
ALASKA DELEGATION’S ROLE
A bipartisan group of 400 members of Congress passed a delay of the HIT tax for 2017 for one year, with Sen. Lisa Murkowski as a co-sponsor.
Now, Senate Bill 1859, introduced by Sen. Cory Gardner of Colorado in September would need to pass before Dec. 31.
That leaves little time, since Congress will likely recess for the Christmas break on Dec. 14.
A host of Republican senators have co-sponsored SB 1859, including James Inhofe-OK, Tom Cotton-AR, Ron Johnson-WI, Rob Portman-OH, Jeff Flake-AZ, Roy Blunt-MO, John Barrasso-WY, Ted Cruz-TX, Dean Heller-NV, Tim Scott-SC, Roger Wicker-MS, Johnny Isakson-GA, Shelly Moore Capito-WV, John Kennedy-LA, Todd Young-IN, Mike Rounds-SD, and Chuck Grassley-IA.
Must Read Alaska has reached out to Murkowski and Sullivan and will update this report with their comments and perspectives. Senator Dan Sullivan has voted to repeal all of Obamacare. Sen. Lisa Murkowski is on record to repeal the individual mandate, but has not yet made public her position on the HIT tax.
