2020 ACA health insurance premium tax

4% ACA premium tax returns in 2020

Authored by Bukaty Companies on September 24, 2019

Self funded plans exempt from tax

After a suspension in 2019, the health insurance tax, spawned by the Affordable Care Act (ACA), will be reinstated in 2020. That tax affects fully insured medical, dental and vision coverage. (See a more complete list of affected coverages below.) 

For 2020, the tax is approximately 4% of premium. It’s collected in monthly premium payments and used to help fund state and federal health insurance Marketplaces. The tax was implemented in 2014 and was suspended by Congress in 2017 and 2019. The IRS estimates the 2020 tax equates to $15.5 billion.

WHAT IT IS Permanent, annual fee on health insurers starting in 2017 (suspended for 2017 and 2019)
PURPOSE Helps fund state and federal Marketplaces
TAX IMPACT Expense is deductible for employers as part of premium
ESTIMATED COST Approximately 4% of premium, totaling $15.5 billion
COVERAGES AFFECTED Individual and group fully insured medical plans
Stand-alone fully insured dental and vision plans
Medicare Advantage plans
Retiree-only plans
Prescription drug Part D plans
Multi-employer welfare arrangements (MEWAs)
COVERAGES EXCLUDED Self-funded employer sponsored group health plans
ASO/stop-loss plans
Accident-only plans
Hospital-indemnity and cancer plans
Medicare supplement plans that meet certain requirements
VEBAs sponsored by an entity other than an employer(s)
U.S.-issued expatriate plans

For more information, contact your Bukaty benefits consultant at 913.345.0440.