Guidance Regarding Health Insurance Tax Repeal

On December 27, 2019, the Insurance Department issued a bulletin to health insurance providers regarding necessary filing and credit adjustments following the Health Insurance Tax repeal. The guidance affects employer groups with plan years beginning between January 1, 2020, and December 1, 2020.

Since 2014, the ACA Health Insurance Tax imposed a sales tax on health insurers, and those insurers generally passed the cost along to consumers and employers by increasing the health plan premium. On December 19, 2019, Congress permanently repealed this tax effective January 2021. However, for plan years beginning after January 1, 2020 (and therefore covering part of 2021), the 2021 portion of the tax was already included in the premium rate charged.

Accordingly, the guidance directs carriers that have approved group rates for plan years beginning in 2020 to refile such rates for the second, third, and fourth quarter of 2020 to remove the fee for the corresponding portion of the plan year in 2021. Filings should be submitted no later than March 1, 2020. For groups with plan years beginning February 1, 2020, through March 31, 2020, carriers are directed to provide a credit or refund of the 2021 fee to the employer group in the 2020 plan year.

Although the bulletin is directed at insurance carriers that deliver or issue group health insurance policies in Connecticut, affected employers should also be aware of the guidance and rate refiling requirements. Additionally, employers with plan years beginning February 1, 2020, through March 31, 2020, should expect a credit or refund of the 2021 health insurance tax fee in the 2020 plan year. They should also analyze any responsibility to return a portion of any such refund to plan participants based on ERISA guidelines.