ACA Health Insurance Fee Will Increase in 2020

The Affordable Care Act (ACA) imposes an annual, non-deductible fee on the health insurance sector, allocated across the industry according to market share.

The applicable amount in the past for each fee year was:

  • $8 billion for calendar year 2014;
  • $11.3 billion for calendar years 2015 and 2016;
  • $13.9 billion for calendar year 2017; and
  • $14.3 billion for calendar year 2018.

It was decided that beginning in 2019, the applicable amount will increase based on the rate of premium growth. On September 4, 2019, the Internal Revenue System (IRS) issued Notice 2019-50 to index the applicable fee amount, increasing it to $15,522,820,037 for the 2020 fee year.

Employers are generally not responsible for paying the health insurance providers fee. However, health insurance carriers may shift the cost of the fee onto employers that sponsor an insured plan – either by a corresponding increase in premiums or by separately charging the entity for a portion of the fee. As a result, the increased health insurance providers fee amount will likely result in premium increases for 2020.

The fee applies to:

  • Health insurers
  • Health maintenance organizations (HMOs);
  • Certain insurance companies;
  • Providers of Medicare Advantage, Medicare Part D prescription drug coverage or Medicaid coverage; and
  • Non-fully insured multiple employer welfare arrangements (MEWAs)

The fee which is treated as an excise tax, is required to be paid by September 30, of each calendar year. The health insurance providers fee, however, does not apply to companies whose net premiums written are $25 million or less.

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