The health insurance industry is lobbying yet again for a delay of the Affordable Care Act's tax on insurers, but experts say that wouldn't benefit consumers as much as it might seem.
Why it matters: Insurers argue the tax gets passed onto enrollees, and the threat of higher premiums has spurred Congress to suspend the fee twice already.
The ACA included the health insurance tax as a way to pay for the law's coverage expansion. The logic was that insurers would be getting new, subsidized customers, and in exchange they would pay a fee.
- The tax was delayed for the first time for the 2017 plan year, which has led to a recurring lobbying blitz to keep the tax off the books. The tax was suspended again for 2019.
What they're saying: Insurers and many Republicans argue the tax results in people paying more for their coverage and that it should not reappear in 2020.
- "All taxes, just like sales tax for example, are passed through to consumers in the form of higher premiums," Kristine Grow, spokesperson for America's Health Insurance Plans, said in a statement.
Between the lines: Insurers do pass on the cost of the tax through higher premiums, when it’s in effect: Actuaries say the tax leads to premiums being 1-3% higher than they would be otherwise.
- When the tax is paused, consumers avoid that premium increase, but insurers don’t pass on all of the tax savings through lower premiums. They keep a lot as profit.
Yes, but: An ACA provision that caps insurers' profits prevents them from keeping too much as profit, said Andy Slavitt, who ran ACA programs for part of the Obama administration.
- "They may say they are, and they may certainly do it upfront, but they will have to give rebates to consumers,” he said.
By the numbers: Three of the country's largest health insurers — Anthem, Cigna and UnitedHealth Group — will collectively pocket more than $500 million in savings next year from the ACA's tax holiday, to shareholders' ultimate benefit. Their savings, according to an analysis of Wall Street forecasts:
- UnitedHealth Group: $365 million
- Anthem: $104 million
- Cigna: $50 million
Insurers should be able to handle the tax now that the ACA markets, in particular, have stabilized, Slavitt said.
- "There was at least a decent argument to be made in 2015, 2016 that maybe you delay it until the markets are at some equilibrium where they're competitive and profitable," he said. "Now that they're competitive and profitable, that argument isn't as strong."
The big question: Whether Democratic gains in the midterms would make Congress less likely to delay the tax again.
- "I can think of a few other ways to spend over $10 billion that don’t involve lining insurance company pockets without a demonstrable benefit to consumers," a Democratic aide said.