ACA Federal Insurer Tax Suspended for 2017

As a result of recently passed legislation, the Affordable Care Act’s (ACA) Federal Insurer Tax (also known as the Health Insurance Provider Fee) will be suspended for one year, beginning on January 1, 2017. Collection of this tax will resume in 2018. The Federal Insurer Tax applies to fully-insured plans only. Self-funded employers are not subject to this additional tax.

For large groups, beginning with April 2016 renewals a rate adjustment credit has been or will be applied to the renewal rate. The credit will continue to be applied on a pro-rated basis for large groups renewing for the rest of 2016 and into 2017.

You will notice the biggest impact for your clients that renew later in 2016 and early in 2017, as the rate year coincides with the 2017 calendar year. We are awaiting direction from the Office of the Health Insurance Commissioner (OHIC) about whether there will be a rate change for small groups and how it will be implemented, and will provide an update once we have more information. For further details on the 2017 moratorium on the Federal Insurer Tax, review guidance released by the IRS in these questions and answers.

The Federal Insurer Tax was suspended under the recently passed new law that also delays the implementation of the Cadillac Tax by two years, to 2020. The Cadillac Tax is a 40 percent excise tax on any “excess benefit,” currently defined as the amount by which the annual cost of health coverage exceeds $10,200 for individual coverage and $27,500 for coverage for more than one individual.

We will provide further information as it becomes available.