Fact Sheet

The Impact of the Health Insurance Tax on Medicare Advantage

The Patient Protection and Affordable Care Act (ACA) imposed an annual tax on health insurance premiums. The tax applies to individual policies, small groups, employers that are not self-insured, Medicaid managed care, Medicare Part D, and Medicare Advantage. The $8 billion tax was first levied in 2014, and grows every year by the rate of growth in premiums. To prevent premium increases, the HIT was suspended for 2017. The HIT is scheduled to be reinstated in 2018 and is expected to rise to $14.3 billion.

Over 20% of the tax falls on Medicare Advantage and Part D plans, likely resulting in an increase in premiums and/or cost sharing paid by seniors and other beneficiaries covered by Medicare Advantage and prescription drug coverage under part D.