Surprise: New insurance fee in health overhaul law

BY RICARDO ALONSO-ZALDIVAR, ASSOCIATED PRESS

Charles Dharapak/AP File Photo

This March 23, 2010, file photo shows 22 pens next to President Barack Obama as he signs the health care reform bill in the East Room of the White House in Washington. Multiple pens are used to sign legislation, and then distributed to supporters of the legislation. Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Barack Obama’s health overhaul. The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest company health plans, and much of that is likely to be passed on to employees.

Charles Dharapak/AP File Photo This March 23, 2010, file photo shows 22 pens next to President Barack Obama as he signs the health care reform bill in the East Room of the White House in Washington. Multiple pens are used to sign legislation, and then distributed to supporters of the legislation. Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Barack Obama’s health overhaul. The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest company health plans, and much of that is likely to be passed on to employees. by Katie Bean

Washington — Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Barack Obama's health care overhaul.

The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers.

Employee benefits lawyer Chantel Sheaks calls it a "sleeper issue" with significant financial consequences, particularly for large employers.

"Especially at a time when we are facing economic uncertainty, (companies will) be hit with a multi-million dollar assessment without getting anything back for it," said Sheaks, a principal at Buck Consultants, a Xerox subsidiary.

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee.

The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to 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 employer-sponsored 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 as the changes in Obama's law take effect.

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. That's because major companies usually pay upfront for most of the health care costs of their employees. It may not be apparent to workers, but the insurance company they deal with is basically an agent administering the plan for their employer.

The fee will total $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. That means the per-head assessment would be smaller each year, around $40 in 2015 instead of $63.

It will phase out completely in 2017 — unless Congress, with lawmakers searching everywhere for revenue to reduce federal deficits — decides to extend it.

Tagged: health care overhaul, insurance

Comments

Jim Phillips 1 year, 7 months ago

No! Really? Can't be! I am sooooooooooo shocked!

1

Jim Phillips 1 year, 7 months ago

Now, you can't blame our young President. Aunt Nancy wouldn't let anyone know what was in the bill until they passed it. Now, why did she do that?

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Jean Robart 1 year, 7 months ago

You didn't really believe what Obama said about the "expansion of healthcare" and costs going down, did you? Or for that matter---much of what he says period.

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Cait McKnelly 1 year, 7 months ago

So it's going to raise my premium a whole FIVE DOLLARS A MONTH??? Oh the AGONY! Why...why...this means I won't be able to stop at Starbucks tomorrow and get my daily mocha latte!
You guys get your knickers in a twist so easy. Never mind the ACA has ALREADY saved this country billions in health care costs and it hasn't even been entirely implemented yet.

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Enlightenment 1 year, 7 months ago

Here is a list of savings due to the ACA, along with realistic projections. The huge monetary savings include direct benefits to medicare recipients via closing the donut hole, and to the government through the reduction of medicare fraud (billions of dollars). Please READ!!

http://www.cms.gov/apps/files/aca-savings-report-2012.pdf

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KS 1 year, 7 months ago

You call that a justification? You deserve everthing you get.

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RoeDapple 1 year, 7 months ago

So . . . . in order to save me money on health care I am going to have to pay more . . .

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Cait McKnelly 1 year, 7 months ago

Roe, see my comment below. 5$ a month is a small price to pay for saving you hundreds throughout the year.

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Dan Eyler 1 year, 7 months ago

Honestly this is just the tip of the hidden cost to business and the employee. So many believe if the government gives it to you and especially if they say it's free people run to the voting booth and vote for that. Some of us realized in childhood that if it's free something smells. You're going to pay for it that's for sure but you not going to be happy with what your getting for free.

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Pepe 1 year, 7 months ago

WHERE MY OBAMA PHONE AT????

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Charles L Bloss Jr 1 year, 7 months ago

As Pelosi said " We need to pass this bill so we know what's in it ". All sorts of surprises in the 1800 page bill. Such as the 3.8% tax on all real estate transactions, and who knows what else is hidden in it. I agree with the GOP, get rid of Obamacare!!

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sleepy33 1 year, 7 months ago

There's not a 3.8% tax on all real estate transactions. That's a false statement.

3.8% tax on the PROFIT you earn, only if greater than $500,000, on the sale of any vacation/second home (not primary residence). The first $500k is exempt. Profit, not sales price, so you have to be selling it for more than $500k greater than what you paid.

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Cait McKnelly 1 year, 7 months ago

So paying an extra 63$ a year is going to close the donut hole? (And that's just the half of it.) I'll take it, considering that I'm on Medicare and the donut hole has already cost me well over 1k. I know it won't happen all at once; that it's a step by step process. But it shrank this year and will shrink even more next year. Sounds good to me and if you're a Boomer like me it should sound good to you too.

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patkindle 1 year, 7 months ago

If you think health care is expensive now, wait until you see what it costs when it's free!

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Centerville 1 year, 7 months ago

"The Obama administration says it is a temporary assessment..." Yea, we can bet on that. The only thing temporary is the amount, as this will grow like fungus.

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Centerville 1 year, 7 months ago

Oh, and don't forget (because the Journal World won't dare report it) the 'cozy' no-bid deal between United HealthCare and Sibileus. Wherein United is designing the federal exchange, in which United will sell health insurance. Which the US consumer will be required to purchase.

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roadrash 1 year, 7 months ago

Change can be scary! Especially if your nerves are all jangled from listening to Hate Radio.

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Katherine Greene 1 year, 7 months ago

I am happy to pay an additional $5 a month for three years to make sure everyone can be covered. It's not that much money on a monthly basis.

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MerriAnnie Smith 1 year, 7 months ago

Actually, yes, I am. They should be willing, but if they are not, then yes, force them. Some people have to be dragged into the future and progress. So be it. Your choice. You can get up and walk like a man or be dragged.

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MerriAnnie Smith 1 year, 7 months ago

$5.25 cents a MONTH.

Most of us waste more than that without giving it a second thought.

It's temporary. Each year it goes down. But even if it was not temporary and even if it did not go down each year, it's still worth it to get everyone insured.

The savings will come when medical care costs do not go up to cover the uninsured who must use the ER for every medical need, rather than the less expensive general practitioner route.

This is nothing new. Someone, somewhere is faking a big hullabaloo again, in an effort to upset people over Obamacare.

This won't be the last time they'll do that. And it won't be the last time it works. Witness all the upset people posting.

Do yourself a favor. Compute what percent $5.25 is to your total insurance cost.

If everyone would have gotten behind Hillary Clinton many years ago when they tried to set up a system more like universal care for us, you wouldn't be seeing this, anyway.

We need a Medicare system for everyone in this country, where we dump the middle man and pay straight into the Medicare system, who then pays the provider. Right now, we have what the right insisted on having. We WERE going to get healthcare for all in a more responsible way. It has been coming a long time. It could have been much less expensive and easier if people had not been such ninnies about it.

Maybe next time a president tries to fix a long-standing problem that needs to be fixed, you'll stop seeing the D behind his name and thinking Marxist, Socialist, Muslim... and be reasonable about it. I won't hold my breath.

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