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Health InsuranceThe Affordable Care Act (aka Obamacare) expands the Medicaid system and provides income-based subsidies for individuals purchasing insurance on the Health Insurance Marketplace.  It raises government revenue to pay for these expansions and subsidies through new taxes and fees.  Several new taxes were discussed in our recent blog article posted on January 8, 2013.  But there are even more sources of revenue that are about to hit your wallet.  These are intended to raise additional funds over the next 10 years and will likely begin to appear as increased costs to your health insurance.

Comparative Effectiveness Research Fee.  This fee will fund the “Patient-Centered Outcomes Research Institute”, or PCORI, which is a nonprofit center created by the ACA.  It is a new government-sponsored organization that will research the effectiveness, risks and benefits of various medical treatments.  IRS will charge health insurance companies $1 per insured member per year during 2013 and $2 per member per year from 2014 to 2019.

Federal Insurance Premium Tax.  This is a tax that will begin to be charged to health insurance companies in 2014.  Based on premiums written in the preceding year, the new Federal Premium Tax is intended to raise $8 billion in revenue for the government in 2014 with that amount increasing in subsequent years.

Reinsurance Fee / Contribution.  Beginning in 2014 and running through 2016, health insurance companies will be required to pay an annual $63 fee to the US Department of Health and Human Services for each covered member.  This is intended to fund insurers that incur excessive claims costs for enrollees who purchase individual coverage, either through or outside of the Health Insurance Marketplace.

Marketplace Fee.  A tax equal to 3.5% of the monthly premium on individual and small group health plans will be paid by health insurance companies participating in the state or federal Health Insurance Marketplace beginning in 2014.  This fee is intended to make the Marketplace self-supporting by January 2015. (Michigan is one of 31 states that have opted out of a state-run Marketplace.)

Risk Adjustment Fee.  Beginning in January 2014 an annual fee of $0.96 per insured member will be collected from health insurance companies on their individual and small group plans.  It is intended to pay for administrative expenses and to pay carriers that insure more members who are likely to have high-claim costs.

High Cost Health Plan Excise Tax.  40%!  You read that correctly!  A 40% tax will be assessed on the value of employer-provided health benefits that exceed certain thresholds – the so-called “Cadillac” plans.  The tax will lower the tax exclusion for employer-provided benefits and will be an incentive for employers to offer cheaper, less generous health insurance policies. 

Each of these fees or taxes may sound like small amounts when viewed individually.  But, collectively, they add up big – to the tune of $540 billion over the next decade to help offset the huge costs associated with the Affordable Care Act.  One could reasonably guess that these fees and taxes will be passed down from the insurance companies to the policyholders in the form of higher premiums.  We understand that some insurance companies will be displaying these fees and taxes as separate items on their premium invoice.

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