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Smart Benefits: Employers/Insurers To Foot Healthcare Reform Fees

Monday, April 01, 2013

 

Self-insured plan sponsors and/or insurers will need to pay up to 3 new fines as part of the PPACA.

Self-insured plan sponsors (including Health Reimbursement Arrangements) and/or insurers will need to pay up to three new fees as part of the Patient Protection and Affordable Care Act (PPACA). The IRS and the Department of Health and Human Services (HHS) recently issued final regulations that detail these fees.

Two Temporary Fees for Insurers and Self-Insured Plan Sponsors

The following two temporary – but long-term – fees must be calculated and paid by self-insured plan sponsors and insurers, although the latter will likely pass the fees along to fully insured groups. The fees are both based on the number of covered lives which includes employees, retirees and their covered spouses and children covered by the plan.

  • Patient-Centered Outcomes Research Institute (PCORI) fee. The PCORI fee is to support research for the most effective ways of treating various diseases. It started in 2012 and is based on plan year starting at the date a plan renews until the end of that plan year. Despite the PCORI fee being based on the plan year, the fee is due annually on July 31. Through 2019, the fee is $1 or $2 per covered person per year.
  • Transitional Reinsurance Fee (TRF). The TRF fee, which is meant to pay a portion of the cost for individuals with large claims, is based on a calendar-year count, regardless of when the plan renews. TRF fees will need to be reported by November 15, with the fee due early the following January. Because reporting of the TRF is due in November, only the first nine months of the calendar year are used for reporting. The TRF fees will start in 2014 and will be $63 per covered person. For a family of four, that could add another $252 in premium costs for the year. The fee will reduce to 2/3 of that in 2015 and half that amount in 2016, at which time the fee will expire. States can charge a separate TRF fee as well, but if they decide to, they must reveal details by April 11, 2013.

And One Permanent Fee for Insurers Only

Only insurers – not self-funded plans – will pay the Health Insurance Provider (HIP) fee. The HIP fee is not just for medical, but also includes fees for dental and vision coverage, too. The total fee is $8 billion in 2013, $11.5 billion in 2015 and 2016, 13.5 billion in 2017 and 14.3 billion in 2018. It will be indexed for inflation in later years. The fees will vary by insurer size, with the bigger insurers paying more. The HIP fees translate to estimated additional premium increases of 2%.

Little Fees Add Up Big

If you total the three fees, they could add as much as an additional 5% to premium increases next year. And at some point, these added costs will find their way from the insurers and employers to working employees who are finding it hard to pay for their insurance costs today. 

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

 

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