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Small Business Digest



Families, Companies Face Significant New Healthcare Insurance Tax Costs

AHIP Study

Families and companies will face higher taxes when the Affordable Care Act (ACA) kickes in.

The taxes will increase the cost of health care coverage for consumers and employers in every state, according to a new state-by-state analysis conducted by Oliver Wyman for America’s Health Insurance Plans (AHIP). 

The ACA imposes a new sales tax on health insurance that starts at $8 billion in 2014, increases to $14.3 billion in 2018, and will continue to increase each year. The Joint Committee on Taxation estimates that the health insurance tax will exceed $100 billion over the next ten years. 

“With full implementation of the ACA a year away, the focus needs to be on making coverage more affordable,” said AHIP President and CEO Karen Ignagni.  “Taxing health insurance will have the opposite effect by making it more expensive.”

Ignagni noted that the health insurance tax will increase costs for individuals and families purchasing coverage on their own, small businesses, Medicare Advantage beneficiaries, and Medicaid managed care programs.  AHIP supports legislation (H.R. 1370, S.1880) that would repeal the tax. 

The new Oliver Wyman analysis builds upon its 2011 report, “Estimated Premium Impacts of Annual Fees Assessed on Health Insurance Plans,” which provides national estimates on the impact of this tax on health insurance premiums.  The previous report found that the health insurance tax alone “will increase premiums in the insured market on average by 1.9% to 2.3% in 2014,” and by 2023 “will increase premiums 2.8% to 3.7%.” (For a state-by-state listing click here)

The latest report, “Annual Tax on Insurers Allocated by State,” provides per-person and cumulative estimates of the impact this tax will have on individual market consumers, employers, and Medicare Advantage beneficiaries in all 50 states, as well as the impact on state Medicaid managed care programs.  The charts below list the top five states with the highest per-person cost impact in each market segment.  Families purchasing coverage in the individual market will be hit the hardest in New York while those getting coverage from a small employer will be most impacted in West Virginia.  Medicare Advantage beneficiaries in New Jersey and the Medicaid managed care program in Washington, DC top those lists.


The new analysis also estimates the aggregate cost that will be imposed on residents in each state over the next ten years.  Below is a list of the top ten states most impacted by this tax (in total dollars):


These Oliver Wyman reports are consistent with previous analyses on how the health insurance tax will impact the cost of coverage:

  • According to the Joint Committee on Taxation: “For those insurance premiums that are subject to the fee, we estimate that the premiums, including the tax liability, would be between 2.0 and 2.5 percent greater than they otherwise would be.” 
  • In a November 30, 2009 letter, the Congressional Budget Office stated that “New fees would be imposed on providers of health insurance and on manufacturers and importers of medical devices.  Both of those fees would be largely passed through to consumers in the form of higher premiums for private coverage.” 

For health care reform to work, coverage needs to be affordable and there needs to be broad participation in the health care system.  The health insurance tax undermines the goal of affordability.  To learn more, visit


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