On February 28, 2019, the Oregon Senate passed legislation that will extend and increase the tax paid on group medical insurance premiums. The legislation (HB 2010) was previously approved by the Oregon House and is expected to be promptly signed by Governor Brown.
The legislation pertains to the Oregon Reinsurance Program (the “ORP”) that was established in 2017. The ORP provides assistance to health insurers to offset the costs of covering consumers with high medical costs so as to spread risk across a broader health insurance market. Specifically, the ORP reimburses insurers a stated percentage (generally 50%) of claims between an attachment point and a cap that are established each year by the state. For 2019, the attachment point is $90,000 and the cap is $1 million. Without such reimbursements, insurers would be hesitant to offer coverage in certain areas of the state.
Funding for the ORP has been achieved in large part due to an assessment charged to insurers on the gross amount of premiums earned by an insurer derived from group medical insurance policies delivered or issued for delivery in Oregon. Originally, the assessment rate was 1.5% of the gross amount of such premiums, and was to be payable only for premiums received through the end of 2019. In addition, the assessment did not apply to premiums paid for stop-loss insurance coverage for self-insured plans.
HB 2010 expands and increases the assessments on insurance carriers, and it does so in three ways:
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First, it continues the premium assessments for seven more years—through 2026;
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Second, it increases the rate of assessment from 1.5% of the gross amount of premiums to 2% of such amounts, effective for premiums earned on and after January 1, 2020; and
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Last, it imposes the assessment on premiums for stop-loss insurance coverage, beginning in 2020.
Although the assessment is made against and paid by the insurance carriers, the carriers typically will pass through the assessments to policyholders through increases in the premiums charged for coverage. Employers will wish to discuss the impact of the increased and extended assessments with their insurance advisors.
