Industry group: Fee ‘came out of the blue’
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.