Smart Benefits: New Healthcare Reform Fee Means Higher Premiums

Monday, August 12, 2013


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A new healthcare reform fee known as the Health Industry Fee will raise your healthcare rates again.

Workers have the Treasury Department and the IRS to thank for yet another fee that insurers will need to pay starting January 1, 2014 -- and will pass on through insurance premium increases.

The fee, known as the Health Industry Fee, is one of several new fees intended to help implement healthcare reform, specifically by funding the federal and state exchanges and research on disease treatments. The new, permanent fee will grow annually as premiums rise, and is expected to raise $8 billion in 2014 and up to 14.3 billion by 2018.

Dental and Vision Plans Affected

Last month, insurers and employers with self-funded health plans paid the PCORI fees. And in November, insurers, self-funded employers and third party administrators will be readying to pay the Transitional Reinsurance Fees (TRF). But while those fees only impact health plans, the Health Industry Fee will get added to stand-alone dental, vision, behavioral health and pharmacy plans.

Prepare for Premium Increases

Since insurers must pay this fee, which is not tax deductible, they will raise premiums to offset the impact.

According to Milliman, one of the world's largest actuarial service providers to the health care industry, this fee will increase plan costs an average 1.7-2.4% immediately and 2-2.9% longer term.

Locally, the three health insurance carriers, BCBSRI, UnitedHealthcare and Tufts Health Plan, report that an average of 3.83-4.5% will be added for healthcare reform related costs, including the Health Industry Fee. And Delta Dental of Rhode Island plans to add an average of 1% to dental renewals because of it.

Fee Exceptions

Not-for-profit health insurers will have an edge over their for-profit competitors since they don't have to pay the fee if 80% of their revenue is funded by government programs like Medicaid and CHIP.

Self-funded employers, as well as stop-loss vendors, will also avoid this fee, another strong reason why more employers, particularly smaller ones, are opting for self-insurance. When comparing health care reform fees alone, self-insured employers health insurance costs will be 4-5% less than their fully-insured peers come January. 

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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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