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 |
| RESPONSIBLE FOR PAYMENT | Insurers |
| 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.
