For health insurers, there’s a lot to like in a spending package passed by Congress to avoid a government shutdown.
One of the two measures that make up the $1.4 trillion spending package will completely repeal the long-reviled health insurer fee (HIF) starting in 2021, which will especially help insurers in the Medicare Advantage business. The legislation also includes two provisions to that could stabilize the Affordable Care Act exchanges by thwarting any attempts to ban silver loading or auto-reenrollment, AIS Health reported.
And portions of the Lower Health Care Costs Act of 2019 — including new transparency requirements for contracts between providers and health plans, and a solution to surprise medical billing that involved arbitration — neither passed on their own nor made it into the spending package.
President Donald Trump signed the spending package into law on Dec. 20 after both the House and Senate passed the legislation.
The HIF repeal, effective starting in 2021, is the most significant portion of the spending package for the managed care industry.
“This legislation is an early Christmas gift for healthcare stocks across the board,” Evercore ISI analyst Michael Newshel advised investors in a Dec. 16 research note. “We had been anticipating HIF relief for 2021 and maybe 2022 too, but permanent repeal is of course better and removes any future uncertainty about the fee’s possible return [after 2020],” he wrote.
Citi Research analyst Ralph Giacobbe added that the HIF’s repeal is “a major win for the MCOs, particularly those with significant Medicare Advantage exposure like [Humana] given the dynamics of that end market and the inability to pass through the tax.”
In the commercial insurance market, carriers have largely passed the cost of the HIF onto their members, “so eliminating it would have the impact of reducing premiums for consumers, which would be politically expedient,” Credit Suisse analyst A.J. Rice wrote in a Dec. 16 note.