The state’s four largest nonprofit health insurers said Friday that hefty taxes and fees related to the federal health care law caused them to lose a combined $124 million on operations in the first three months of the year.
Since the beginning of 2014, insurers have been required to pay a series of taxes and fees to underwrite the Affordable Care Act, which expanded health coverage to millions of new people nationwide.
Tufts Health Plan said it lost $24 million, down from a loss of $44 million last year. Harvard Pilgrim Health Care lost $20 million, up from about $17 million last year. And at Fallon Health, the losses were about $7 million, up from $3 million.
Insurers are required to record payment of the taxes and fees in the first quarter of the year. They don’t expect significant losses to continue for the rest of 2015, but the first-quarter losses could drag down their overall earnings. Last year, most of the large insurers reported operating losses and blamed them largely on the federal taxes and fees. But income from investments or other sources helped them end 2014 with net gains.
The losses in the first quarter of this year are on track with what insurers said they were expecting. Their new taxes and fees are significant; Blue Cross, for example, said it paid $87 million to the federal government to pay for the health care overhaul.
The federal government is collecting some $8 billion from health insurers and using the money to, in part, underwrite coverage for people receiving subsidized policies.
Although the charges have been in effect only since last year, insurers warned they could trickle down to consumers in the form of higher premiums. Blue Cross and Tufts, for example, said premiums are up about 1 to 2 percent.
“It has to get passed eventually to customers,” said Tufts’ chief financial officer, Umesh Kurpad. “This is the reason why health plans are looking for ways to reduce costs in all other aspects of our business.”
Another ongoing challenge, insurers said, is the cost of expensive new medicines. The biggest budget buster among specialty drugs in recent months has been Sovaldi, a breakthrough drug for hepatitis C that costs $84,000 for per treatment per person.
In addition to the federal taxes and fees, “the major story of the quarter, and likely for the year, is the increasing cost of so-called specialty medications which continue to rise,” Allen Maltz, chief financial officer at Blue Cross, said in a statement.
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