A topic that will likely be addressed at your next next health insurance renewal meeting is likely going to be: Who will pay the Affordable Care Act related fees?
Will it be the employees, employers… or both?
Let’s find out more about what each of these ACA fees are and how much they will cost you:
Insurer Fee or Health Insurance Industry Tax:
This tax is funding people who purchase health insurance on the marketplace and qualify for tax credits.
- This fee is permanent and is paid on an annual basis.
- This fee is about 2.5% of the total health premium.
If your group plan is running at $500,000 a year, then that is about $12,500 in additional costs. Some of the carriers will show this fee as a part of your premium statement, while others will embed it in the total cost.
The Risk Adjustment Fee:
This tax is on small group health plans and individual health plans to redistribute premiums from low-risk to high-risk policyholders.
- This is a permanent tax and is about $66 per subscriber.
- This tax is also either embedded or a line item on your premium statement. Anthem shows the line item while UnitedHealthcare (UHC) embeds it.
This tax is to be used to help carriers offset claims in high risk areas. For example, Lake County may have higher premiums than Hamilton County. These funds would then be distributed to carriers that continue to insure Lake County despite losses.
Transitional Reinsurance Fee:
The transitional reinsurance fee impacts both fully insured and self-funded group health plans.
- This fee is collected for the years of 2014-2016.
- Estimated at $5 a month per member.
This fee is to help Individual carriers offset claims both on and off the exchange.
Patient-Centered Outcomes Research Institute (PCORI) Fee:
This fee impacts both fully insured and self-funded groups.
- This fee runs about $1 -$2 per member.
- This fee started in 2012 and will go until 2019.
The fee funds research that evaluates and compares health outcomes, clinical effectiveness, and risks and benefits of medical treatments and services.
Note: Per member means total number of people on the plan.
Who Covers the New Costs?
So now the big question is: Who is going to pay these new costs? Should it be passed to the employee, absorbed by the owner, or split up into current contribution levels? When we look at UHC’s billing, all of the fees for the fully insured groups are being embedded. For them, it is most likely to go into the contribution split.
In Anthem’s case, it is showing as a line item. The cost could be passed onto the employee or be covered in full by the company.
On self-funded plans, the situation is very different. Some of the carriers and third-party administrators are not collecting the fees. Instead, they are passing that responsibility on to the client. They are stating that because the group knows the accurate information on employee count, they would be best at determining the correct amount.
In 2018, the excise tax, or Cadillac Tax on high-value health plans, will be in effect. If your health plans cost more than a certain threshold, then a tax of 40% is applied. We are still waiting to find out what that threshold will be. Originally, the government set it at $10,200 for single coverage and $27,500 for family. If I understand correctly, if you had a group policy where the family cost was $35,000, then the issuer could be taxed an additional $3,200. This tax will have a huge impact on what kind of plans are offered by employers.
If you have any questions regarding the new fees please contact me, Tony Nefouse, at (800) 846-8615 and we can discuss them further.