In 2014, fully-insured employer plans were greeted with a nasty surprise – the Health Insurance Providers Fee. The insured’s already massive healthcare costs were being further inflated 1.5–2% due to the new tax congress levied on insurers, which was based upon each carrier’s market share in the health insurance market. Of course that $8 billion fee didn’t impact the insurers, its intended targets. Instead, insurers rationally responded by passing this new cost onto their beloved customers – the employers and individuals who purchase health insurance.
And as we highlighted at the time, the cost impact was going to increase dramatically in subsequent years since the law included escalators – raising it to $14.3 billion within five years. AND, perhaps more importantly, many more employers would abandon the fully-insured markets and self-fund their own plans to avoid this additional tax, leaving fewer heads from which the insurers could recoup their share.
Last year, employers were finally able to breathe a (temporary) sigh of relief. A rare piece of bipartisan legislation introduced a one-year moratorium on the health insurance tax in 2017 that both political parties recognized was not having its desired effect of taxing/penalizing health insurers. But 2018 is a new year and with it has returned the zombie known as the Health Insurance Providers Fee. And as we begin receiving our 2018 renewals I can tell you it’s not pretty – that 1.5–2% the carriers pass down to their customers is now close to 4% in every insured renewal.
To the politicians in Washington – mostly past, but also present – thank you for the brilliant foresight in reducing healthcare costs in the only way you knew how to; by increasing them. To employers who are trying to operate profitable businesses or just keep your lights on – let’s talk about self-funding again.