In­dus­try group: Fee ‘came out of the blue’

Fee

Austin American-Statesman - - BUSINESS - B

raise $25 bil­lion. It starts at $63 and then de­clines.

Most of the money will go into a fund ad­min­is­tered by the Health and Hu­man Ser­vices De­part­ment. It will be used to cush­ion health in­surance com­pa­nies from the ini­tial hard-to-pre­dict costs of cov­er­ing unin­sured peo­ple with med­i­cal prob­lems. Un­der the law, in­sur­ers will be for­bid­den from turn­ing away the sick as of Jan. 1, 2014.

The pro­gram “is in­tended to help mil­lions of Amer­i­cans pur­chase af­ford­able health in­surance, re­duce un­re­im­bursed us­age of hospi­tal and other med­i­cal fa­cil­i­ties by the unin­sured and thereby lower med­i­cal ex­penses and pre­mi­ums for all,” the Obama ad­min­is­tra­tion says in the reg­u­la­tion. An ac­com­pa­ny­ing me­dia fact sheet is­sued Nov. 30 re­ferred to “con­tri­bu­tions” with­out de­tail­ing the to­tal cost and scope of the pro­gram.

Of the to­tal pot, $5 bil­lion will go di­rectly to the U.S. Trea­sury, ap­par­ently to off­set the cost of shoring up em­ploy­er­spon­sored cov­er­age for early re­tirees.

The $25 bil­lion fee is part of a big­ger package of taxes and fees to fi­nance Obama’s ex­pan­sion of cov­er­age to the unin­sured. It all comes to about $700 bil­lion over 10 years, and in­cludes higher Medi­care taxes ef­fec­tive this Jan. 1 on in­di­vid­u­als mak­ing more than $200,000 per year or cou­ples mak­ing more than $250,000. Peo­ple above those thresh­old amounts also face an ad­di­tional 3.8 per­cent tax on their in­vest­ment in­come.

But the in­surance fee had been over­looked as em­ploy­ers fo­cused on other costs in the law, in­clud­ing fines for medium and large firms that don’t pro­vide cov­er­age.

“This kind of came out of the blue and was a sur­pris­ingly large amount,” said Gretchen Young, se­nior vice pres­i­dent for health pol­icy at the ERISA In­dus­try Com­mit­tee, a group that rep­re­sents large em­ploy­ers on ben­e­fits is­sues.

Word started get­ting out in the spring, said Young, but hard cost es­ti­mates sur­faced only re­cently with the new reg­u­la­tion. It set the per capita rate at $5.25 per month, which works out to $63 a year.

Amer­ica’s Health In­surance Plans, the ma­jor in­dus­try trade group for health in­sur­ers, says the fund is an im­por­tant pro­gram that will help sta­bi­lize the mar­ket and mit­i­gate cost in­creases for con­sumers.

But em­ploy­ers al­ready of­fer­ing cov­er­age to their work­ers don’t see why they have to pony up for the sta­bi­liza­tion fund, which mainly helps the in­di­vid­ual in­surance mar­ket. The re­dis­tri­bu­tion puts the big­gest com­pa­nies on the hook for tens of mil­lions of dol­lars.

“It just adds on to ev­ery­thing else that is ex­pected to in­crease health care costs,” said econ­o­mist Paul Fron­stin of the non­profit Em­ployee Ben­e­fit Re­search In­sti­tute.

The fee will be as­sessed on all “ma­jor med­i­cal” in­surance plans, in­clud­ing those pro­vided by em­ploy­ers and those pur­chased in­di­vid­u­ally by con­sumers. Large em­ploy­ers will owe the fee di­rectly.

The fee will phase out com­pletely in 2017.

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