Congress' decision to suspend the Affordable Care Act's tax on health insurers for one year will cost the government $13.9 billion, funding that normally would go to cover subsidies for low-income enrollees and other functions of the law.
The CMS, therefore, expects insurance companies to keep their premiums in check when they file 2017 rates this spring. The hope is the one-year tax reprieve will put a ceiling on premium increases and push savings to consumers instead of into the coffers of health insurers.
“Because the fee is not being collected for the 2017 fee year, administrative costs for plans in all impacted markets are expected to be adjusted appropriately to account for the moratorium,” the CMS said in a document posted Monday.
Members of the Republican Congress embedded the one-year freeze of the tax in the year-end omnibus budget bill, along with two-year delays of the ACA's medical device tax and "Cadillac" tax on high-cost employer plans. The ACA imposed the taxes to seed money for other parts of the law.
However, many payers have not had to bear the full cost of the insurance fee. Companies that operate managed Medicaid plans had part of the tax reimbursed by state governments. Six states have sued the Obama administration saying they should not have had to cover the fee.
Lobbying group America's Health Insurance Plans has vigorously opposed the ACA's annual tax on health insurers and has cited a report that the fee forces insurers to raise premiums from 3% to 4% every year. AHIP CEO and former CMS chief Marilyn Tavenner told Modern Healthcare this year the tax suspension should “equate to some lowering of premiums.”
The CMS' recent decree goes well beyond the ACA's exchange plans. Employer-based coverage and Medicare Advantage plans likewise are expected to hold down premiums next year in lieu of the tax.
“Wherever possible, we would expect MA organizations to reflect these lower costs through lower bids, higher rebates and more supplemental benefits for Medicare Advantage enrollees,” the CMS said in the Feb. 19 Medicare Advantage notice.