OHIC reducing small-business rates for suspended health insurance tax in Q4

Updated at 11:20 a.m.

HEALTH INSURANCE COMMISSIONER Marie L. Ganim announced that she has instructed insurers to refile lower rates on group plans renewing in the fourth quarter of 2018 to reflect the recent suspension of the federal health insurance tax. / PBN FILE PHOTO/RUPERT WHITELEY
HEALTH INSURANCE COMMISSIONER Marie L. Ganim announced that she has instructed insurers to refile lower rates on group plans renewing in the fourth quarter of 2018 to reflect the recent suspension of the federal health insurance tax. / PBN FILE PHOTO/RUPERT WHITELEY

Correction: A previous version of this story mischaracterized estimated savings for businesses due to the suspension of a federal health insurance tax that had been passed through to small businesses purchasing insurance through their premiums. The reassessment will reduce 2018 insurance costs for 1,800 small businesses renewing in the fourth quarter of the year by an average of $1,000.

PROVIDENCE — The Office of the Health Insurance Commissioner is instructing insurers to refile lower rates on group plans renewing in the fourth quarter of 2018 to reflect the recent suspension of the federal health insurance tax that they pay, giving about 1,800 small businesses an average savings of $1,000 in their future premiums.

Collection of the tax was anticipated for 2019 when rates were set for businesses renewing coverage into the year, but a spending bill enacted by Congress, “H.R.195 – Making further continuing appropriations for the fiscal year ending September 30, 2018, and for other purposes,” set a moratorium on collection of the tax next year until 2020.

Cory King, principal policy associate at OHIC, said the federal government sets a revenue target for the tax, which is apportioned by market share.

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Because small and large group plan renewals occur throughout the year, the tax was included in previously approved rates for businesses who renew coverage in 2018 that would carry over into 2019.

Group plans renewing prior to the fourth quarter in 2018 will not be adjusted, said King, because federal regulations requiring notice of changes to rates cannot be met earlier in the year. The fourth quarter is the earliest OHIC can require the rate adjustments.

“Rather than allowing health insurers to collect the tax on all business plans that carry over into 2019, OHIC has directed insurers to immediately submit amended large group and small group rates for businesses that renew in the latter part of 2018, so that we can provide more immediate rate relief to some of Rhode Island’s employers,” Health Insurance Commissioner Marie L. Ganim said.

For groups renewing prior to the fourth quarter of 2018, their 2019 renewal rates will not be fully loaded for the health insurance tax in 2020.

King said rate adjustments will work one of two ways, depending on when the group is up for renewal.

“We asked for rates for small groups renewing in the fourth quarter to be refiled. For groups renewing in the fourth quarter, the tax they would be paying in their monthly premium for 2018 plan year months that extend into 2019 will be taken out of the rates when they receive their renewal quote.

For example, if a group renews Sept. 1, 2018, their renewal premium will include the tax for September through December 2018, but not for January through August 2019,” King said.

OHIC estimates about $1.8 million in total savings will be realized among the state’s small businesses (with 2 to 50 employees).

For small groups renewing in quarters 1 through 3 of 2018 (January through September), OHIC will deduct the tax paid in 2019 from the 2020 tax estimates during the regular rate review process beginning next month.

Insurers have already begun calculating the tax savings into the rates for some large group purchasers. OHIC will ensure that large group premium rates appropriately reflect the suspended tax.

Since individual plans are issued during open enrollment and line up with the calendar year, no 2018 rates will be changed as a result, OHIC reported. For individual market plans, suspension of the tax will be reflected in 2019 rates which will be submitted for OHIC approval by insurers next month.

Rob Borkowski is a PBN staff writer. Email him at Borkowski@PBN.com.