296-12574795088ufr-300x201-9582258The scheduled return of an Obamacare tax on insurance premiums in 2018 would cost New Yorkers $1.1 billion in the first year, according to an industry-sponsored report published this week.

The report by the consulting firm Oliver Wyman, commissioned by the insurer UnitedHealth Group, estimates the tax would increase premiums by 2.6 percent overall and add $22 billion to health costs nationwide.

Nationally, the tax would add $158 to $188 the annual price of individual coverage, $500 to $535 to family coverage, $245 to Medicare Advantage plans, and $181 to Medicaid managed care plans, the study found.

The tax, known as the health insurance tax or HIT, was levied beginning in 2014 as part of President Obama’s Affordable Care Act. A federal budget deal suspended it for one year only, a hiatus that runs out on December 31.

The study warned that the reimposition of the tax in January would contribute to rising costs that are pushing more individuals and employers to drop insurance and leading to higher deductibles and copayments for those who keep coverage.

Rather than imposing a fixed percentage rate, the HIT sets a target amount to be raised – $14.3 billion for 2018 – then pro-rates it against all fully insured premiums collected in the previous year. Because the HIT is not deductible against federal corporate taxes, insurers will have to raise premiums by $22 billion to cover the tab without taking a loss, the study said.

The tax also exempts employers that “self-insure,” effectively favoring the larger companies over small businesses and individuals who buy “fully insured” plans. The study predicted that more employers would respond by self-insuring, which would further boost the tax burden on those left behind.

The Oliver Wyman study is part of an insurance industry lobbying campaign that seeks to “Stop the HIT,” an idea that has received bipartisan support in the past.

For now, health plans are assuming the HIT will come back – and have baked it into their premium requests for 2018. In New York, plans cited the tax as one reason they’re seeking hikes averaging 16.6 percent for non-group coverage, and 13.5 percent for small groups. With open enrollment coming in November, regulators at the Department of Financial Services are due to approve or modify those requests in the next few weeks.

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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