Background

On April 2, the Trump administration announced a broad 10% tariff on imports from all countries, along with additional penalties for countries running trade deficits with the United States. Just a week later, the Trump administration paused some of those tariffs, but raised Chinese import tariffs to 125%. Then, on May 12, Trump lowered Chinese import tariffs for 90 days to 30%.

Trump also said in April that pharmaceutical imports would soon be subject to "major" tariffs as part of an effort to drive manufacturing back to the United States.

"We're going to be announcing very shortly a major tariff on pharmaceuticals," Trump said at a dinner of the National Republican Congressional Committee in April. "And when they hear that, they will leave China. They will leave other places because they have to sell — most of their product is sold here and they're going to be opening up their plants all over the place."

While Trump didn't provide any details on the scope of the tariffs or the timing of the announcement, he has previously suggested a 25% or higher levy on pharmaceutical imports. According to an Ernst & Young report, a 25% tariff on pharmaceutical imports to the U.S. could increase national drug costs by almost $51 billion a year.

In May, Trump issued an executive order that directed FDA, the Environmental Protection Agency, and other agencies to facilitate domestic pharmaceutical production, as well as increase fees for inspecting foreign drug plans.

Other insurers have said they're keeping a close eye on any impacts related to tariffs but aren't including them in their premium rates just yet.

"There is uncertainty around inflation and the economy due to possible tariffs however we did [not] put anything for this in this filing," Kaiser Foundation Health Plan of the Northwest said in a report to Oregon.

"There are sort of a perfect storm of factors that are driving prices up," said Sabrina Corlette, a research professor at Georgetown University's Center on Health Insurance Reforms. Corlette added that insurers usually sign multiyear reimbursement contracts with hospitals, but hospitals could potentially ask to renegotiate if their costs increase as a result of tariffs.

Insurers can't change their premiums during the year, but if health plans overshoot their premiums estimates in rate filings, they must pay back enrollees the difference in rebates.

Insurers "don't have any historical precedent or data to project what this is going to mean for their business and health costs," said Matt McGough, a policy analyst at KFF. "I think it really makes sense that they're trying to hedge their bets.

*Advisory Board is a subsidiary of UnitedHealth Group, the parent company of UnitedHealthcare. All Advisory Board research, expert perspectives, and recommendations remain independent.