(Updated on June 18)
Not-for-profit Blue Cross and Blue Shield health plans reaped $2.3 billion in savings in 2017 from the Trump administration's corporate tax overhaul, according to an analysis by A.M. Best.
Thanks to the Tax Cuts and Jobs Act passed in December 2017, which lowered the corporate tax rate to 21% from 35% and eliminated the minimum alternative tax, 15 not-for-profit Blues insurers scored major windfalls from changes in net deferred income tax.
Chicago-based Health Care Service Corp., which operates plans in five states, reaped the greatest savings at $1.1 billion. Blue Cross and Blue Shield of Michigan scored $358 million in savings, while Horizon Blue Cross and Blue Shield of New Jersey saved about $319 million.
Despite being not-for-profit companies, many Blues affiliates pay the alternative minimum tax, which was eliminated by the Tax Cuts and Jobs Act. A.M. Best said the Blues companies will receive federal refunds as a result.
The ratings agency noted that some Blues plans have announced plans to improve services in part thanks to their tax windfall. Health Care Service Corp. in March said it would launch a $1.5 billion initiative to lower healthcare costs for members over the next three years. Horizon earlier this year said it planned to invest $125 million over five years from its tax refund on mental health and substance abuse programs.
While the GOP tax bill was a boon to many insurers' bottom lines, it also eliminated the Affordable Care Act's individual mandate penalty starting in 2019. Industry experts fear the loss of the mandate will weaken the individual insurance market as younger, healthier consumers opt to forgo coverage, leaving insurers to cover only the sickest, costliest individuals. Already, health insurers in several states are requesting
higher 2019 premiums because of the zeroed out penalty.
For example, insurers in New York
requested an average premium of 38.6% for 2019 individual coverage, with 25.9% of that rate increase attributed specifically to the loss of the mandate.