2014 health insurance taxes on the horizon.
While the spotlight has been on new income taxes to help fund the Affordable Care Act, health insurance companies are gearing up to start paying and collecting taxes set to take effect in 2014. Blue Shield of California has released an overview of the two taxes that will impact health insurance costs in California. The two taxes are aimed at subsidizing health insurance premiums to increase affordability and hedging against potential higher than normal expenses for individuals with pre-existing conditions.
Health Insurer Tax
This is an annual tax on all plans to create a pool of money that will be used as the tax credit premium reduction subsidy for individuals and families with incomes between 139% and 400% of the Federal Poverty Line. The tax credit to reduce the monthly insurance premium is applied immediately when health insurance is purchased through a state exchange.
Blue Shield estimates the Health Insurance Tax will be approximately 2.3% of premiums. Because of the way group plans renew, Blue Shield will actually be adding the 2014 tax to some plans that renew in 2013. Small group, individual and family plans will see the new tax in January 2014. The tax will also be applied to dental and vision plans as well.
Transitional Reinsurance Tax
As individuals with chronic medical conditions get health insurance for the first time in years, they will undoubtedly represent higher claims to address their medical conditions. These are the people that the health insurance companies denied health insurance to because of “pre-existing” conditions or “high risk”. The transitional reinsurance tax will allow the insurance companies to insure themselves against unpredictable costs associated with new members.
By having a back up insurance plan for the insurance companies, the transitional reinsurance tax will help reduce the exposure to catastrophic claims. This in turn will protect health insurance premiums for all members from spikes to cover the insurer’s costs. Blue Shield will be applying a $5.25 transitional reinsurance tax per member per month starting in 2014. The tax sunsets in 2016 and is not applied to dental or vision plans.
Download Blue Shield’s fact sheet -> [download id=”56″]