BY RICARDO ALONSO-ZALDIVAR, ASSOCIATED PRESS
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.
BY JOHN HANNA, Associated Press
TOPEKA — Kansas officials have made little progress toward enacting a key part of the federal health care overhaul, and Gov. Sam Brownback and fellow Republican critics of the law are instead hoping that the U.S. Supreme Court will strike it down, saving them the trouble.
If the nation's highest court does that in its ruling, which is expected Thursday, many Kansas officials are likely to celebrate. But if the justices uphold even part of the law, the state could find itself with a new health insurance exchange over which it has little control.
Republican hostility against the 2010 law championed by President Barack Obama prevented the state from establishing its own exchange, which would help consumers find health insurance starting in 2014. Last year, Brownback returned a $31.5 million federal grant to assist the state with the computer infrastructure for an exchange.
If the requirement for exchanges stands, states face a Nov. 16 deadline to submit plans to the U.S. Department of Health and Human Services. The choices for Kansas would be seeking a partnership with the federal government or having the federal government run the exchange, said Linda Sheppard, the Insurance Department's project manager for the health overhaul.
"I do not believe we'd be able to do a state-level exchange," said Sheppard, also director of the department's accident and health division.
Some industry officials worry about having a federally run exchange for Kansas, fearing its rules could be too burdensome and that some requirements could cut independent agents out of the exchange completely. Kerri Spielman, executive director of the Kansas Association of Insurance Agents, still holds out hope that legislators could work on an exchange next year.
"There are just too many people ready to move and act," she said. "We don't need to reinvent the wheel. We just need to have something that fits Kansas."
Republican legislators defend their lack of action, saying it made no sense to work on an exchange with so much uncertainty surrounding the federal law. And Lt. Gov. Jeff Colyer, a surgeon and former state senator, said Kansas should "determine the state's needs and priorities and then enact our own reforms," without being more specific.
But House Insurance Committee Chairman Clark Shultz, a Lindsborg Republican acknowledged that if all or part of the federal law stands, "we're definitely running into a time deadline here — a crunch."
Kansas has about 350,000 residents who don't have health insurance coverage, or 12.7 percent of the state's population, according to U.S. Census Bureau figures. About 53,000 are children.
Insurance Commissioner Sandy Praeger, a Republican, had planned to work on an exchange, but the Kansas GOP made the 2010 elections largely a referendum on Obama and tapped into the tea party movement's frustrations. Republicans swept all statewide and congressional offices for the first time since 1964 and added to their legislative majorities, and many new lawmakers are conservatives.
"They think they are going to be vindicated," said state Democratic Chairwoman Joan Wagnon, a former Kansas House member. "They've put all of their eggs in that basket."
Brownback was a U.S. senator and an ardent opponent of the health care overhaul before he became governor in January 2011.
Last year, Brownback not only returned the federal grant but also signed a "health care freedom" bill into law. The law says Kansas residents have the right to refuse to buy health insurance, adding that they can't be fined or forced to pay other penalties for refusing.
The law takes aim a provision in the federal health care overhaul requiring most Americans to purchase health insurance, starting in 2014, and imposing tax penalties if they don't. Even some GOP legislators doubted the state law could block the mandate in Kansas, but supporters saw it at least as a powerful statement.
Brownback's administration also has criticized a provision of the federal health care overhaul that expands the Medicaid program, so that states cover childless adults. Republicans are skeptical that the federal government will keep its promises to finance the expansion, and state officials estimate it would add as many as 130,000 people to the state's Medicaid program.
A look at health care overhaul in Kansas
NUMBER OF UNINSURED: 350,000 state residents are uninsured, or almost 13 percent.
WHERE THE STATE STANDS: The Republican-dominated state government has been hostile to the 2010 federal law and hasn't moved to set up a health care exchange. Last year, GOP Gov. Sam Brownback's administration returned a $31.5 million federal grant.
WHAT HAPPENS NOW: If the entire law is upheld, Kansas won't be in a position to set up an exchange in time, according to the state Insurance Department. If that part of the law survives, Brownback's administration would have to decide whether to try to partner with the federal government on running the exchange. If the entire law is struck down, Brownback and other officials are likely to celebrate without taking further action.