TONY WILSON: Affordable Care Act generates more fees for consumers

Tony Wilson

Tony Wilson

They say the only two sure things in life are death and taxes. I think that needs to be revised to death and more taxes.

This year, the Affordable Care Act brings with it two major taxes that will increase health insurance premiums — the Health Insurance Industry Fee and the Reinsurance Assessment — while also increasing fees in other areas.

The Health Insurance Industry Fee is intended to help pay for the subsidies and cost-sharing reductions of those who purchase coverage through the exchange.

The fee will be based on the market share of each health insurance carrier and will be approximately 2.5 percent of the carrier’s premium in 2014. The fee is a permanent, non-tax-deductible and applies to fully insured plans only.

Estimates are the fee will generate $8 billion in 2014 and increase each year to approximately $14 billion in 2018.

If there is any good news about a new fee, then you can find it in that the Transitional Reinsurance Fee is collected for only three years, from 2014 to 2016. But that may be where the good news ends.

The Reinsurance Fee is designed to reimburse carriers that insure high cost individuals. Since underwriting is no longer allowed in the individual market, carriers are expected to take on greater risks and potentially higher claims costs, and the fee is designed to help offset that additional claims cost to provide some financial stability to the insurance market.

The Reinsurance Fee is assessed on all covered members — employees, spouses and dependents. It is approximately $5 per person per month for the first year and is expected to generate $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016.

This fee applies to fully insured and self insured plans. The Reinsurance Fee became effective Jan. 1. Carriers will collect through premiums the fee for fully insured clients while self insured plans must fund and pay the fee directly.

Carriers must submit the number of covered lives to the Department of Health and Human Services by Nov. 15, and HHS will issue by Dec. 15 the amount due. The first payment is due Jan. 15, 2015.

You may recall that the ACA established the non-profit Patient Centered Outcomes Research Institute, an organizations that researches health needs of the various populations.

The PCOR fee, first due in July 2013, is an annual fee per participant in fully insured and self insured plans designed to help fund the Institute’s efforts. While last year the fee was $1 per participant, it will move to $2 per covered life in 2014.

PCORI has started doling out the money. According to the Institute’s website, it has approved to date 279 awards totaling more than $464.4 million to fund patient-centered comparative clinical effectiveness research projects.

There’s also the Risk Adjustment Fee assessed on the issuers of certain plans in the individual and small group market to help fund the cost of HHS to run the Risk Adjustment Program. The program redistributes premiums from plans with low- risk population to plans with high-risk populations. The fee is estimated to be $1 per member per year and is permanent.

Members purchasing plans from the exchange may be surprised to know that carriers are paying a 3.5 percent user fee to offer plans on healthcare.gov. This cost will be passed along to consumers, too.

Finally, the ACA requires that virtually all Americans obtain health insurance coverage in 2014 or face a fine (“shared responsibility payment”) come April 15, 2015. The fine for an individual is the greater of $95 or 1 percent of household income. For a family, the fine is $285 or 1 percent of household income.

I read an article describing the Risk Adjustment Fee as a “modest” increase. In stepping back and looking at the bigger picture all of these “modest” increases, one can easily see that they will add up to significant additional costs to many consumers in 2014.

Questions or comments? Feel free to email me at twilson@nfp.com.

Tony L. Wilson is a partner with NUVISION Financial Corporation based in Conyers. NUVISION is a subsidiary of National Financial Partners Corp., which provides benefits solutions for companies.