There are several new taxes and fees that will begin appearing on the health insurance invoices for small business owners over the next several months.
These taxes and fees generate revenue for the federal government and fund various programs of the Affordable Care Act. The following is a quick review of these fees for small business owners:
Reinsurance Fee – This is a quarterly fee that will be paid by both fully-insured and self-insured groups and people buying form the individual markets. It will subsidize the individual market on and off the Exchange/Marketplace. The temporary Reinsurance program (January 1, 2014,through December 31, 2016) will collect total assessments of $25 billion to fund payments made to carriers with individuals, both on and off the Exchanges, incurring high levels of claims expense. The payments are intended to provide stability in what may be a volatile market during this time period. Blue Cross Blue Shield of Michigan expects this fee to be $63 per year per covered individual ($63 per year per covered employee and per covered dependent – a family of 5 will pay $315/year).
Patient-Centered Outcomes Research Fee (also known as the Comparative Effectiveness Fee) – Money collected from this fee will fund health outcomes and clinical effectiveness research and will be assessed on both self-funded and insured health plan membership. The fee is $1 per covered life (i.e. member) for the average number of covered lives for plan/policy years ending on or after October 1, 2012 and before October 1, 2013. It goes up to $2 per covered life in 2013 for plan/policy years ending on or after October 1, 2013 and before October 1, 2014, and then is subject to adjustment for projected increases in National Health Expenditures in future years. The fee is set to end in 2019.
Federal Insurance Premium Tax/Health Insurer Fee – Health insurers will have to pay an annual fee to help pay for premium subsidies and tax credits to be made available to qualifying individuals purchasing health insurance coverage on the exchanges beginning in 2014. The fee begins in 2014 and has no end. The ACA calls for the government to collect a set total from health insurers each year: $8 billion in 2014, growing to $14.3 billion in 2018 and increasing by the rate of premium growth after that. The fee is assessed only on fully insured health plans and not on self-funded plans.
Exchange/MarketPlace Fee – By law, the MI Health MarketPlace (Michigan’s Exchange) and all Exchanges across the country are required to be self-sustaining by January 2015. This will appear as a monthly user fee equal to 3.5 percent of the monthly premium for each individual and small group health insurance plan.
Cadillac Tax/High Cost Employer – Sponsored Health Coverage Excise Tax. Often referred to as the “Cadillac tax,” Beginning is 2018, this is a tax of 40 percent on the aggregate premium cost exceeding a certain threshold (more than $10,200 for individual coverage and $27,500 for self and spouse or family coverage). It applies to both fully insured and self-funded medical plans.
Risk Adjustment Fee – This fee funds the federal risk adjustment program with a primary goal to spread the financial risk borne by health insurance issuers in the individual and small-group markets more evenly. This fee will be paid for through the individual and small group markets.
Some of these fees will be factored into the premiums you pay and other will be shown as a separate line item on your health insurance invoice. Health insurance industry experts expect the total amount of taxes and fees to be in the range of 6% – 9.5% beginning in 2014. The fees and taxes will be collected by each insurance carrier and remitted to the federal government.
Visit www.sbam.org/decisionpoint for more information about Health Care Reform and what you need to know.