The Affordable Care Act (ACA) requires that taxes be collected in order to fund certain provisions of health reform. Beginning January 1, 2014, there are two new ACA taxes that will go into effect: the health insurer tax and the transitional reinsurance tax. Like many other provisions of the ACA, these taxes will likely lead to higher premiums for consumers. Here is a breakdown of each tax and it’s likely impact on premiums:
Health Insurer Tax
The purpose of the health insurer tax is to help fund premium subsidies for certain individuals and families purchasing coverage through insurance exchanges. The tax will apply to all “covered entities” which are companies providing health insurance for any U.S. health risk such as medical, dental, vision, etc. The tax amount will start at $8 billion in 2014 and climb to $14.3 billion in 2018. Blue Shield of California estimates that the health insurer tax will be approximately 2.3% of premiums.
Transitional Reinsurance Tax
The purpose of the transitional reinsurance tax is to help stabilize premiums and the cost of high-risk individuals entering the individual market in each state’s health insurance exchange. The tax will apply to all commercial, major medical plans, and self-insured plans. The tax amount will start at $12 billion in 2014 and fall to $5 billion in 2016. Blue Shield of California estimates that the transitional reinsurance tax will be approximately $63 per member per year.