New Obamacare Fee to Be Less in 2015: HHS

The 'transitional reinsurance' fee, $63 per life covered under group plans for 2014, will fall to $44 next year.
David McCannJanuary 7, 2014
New Obamacare Fee to Be Less in 2015: HHS

The Department of Health and Human Services (HHS) in December proposed regulations that state how much the “transitional reinsurance fee” mandated by the Affordable Care Act (ACA) will cost employers in its second year.

The fee, intended to help stabilize insurance premiums in the individual marketplace now that health insurers cannot refuse to cover those with pre-existing conditions, already was set at $63 per covered life for 2014. HHS will collect the 2014 fees during 2015.

For 2015, the fee will fall to $44, or $3.67 per month per covered life. The lower fee reflects the ACA’s requirement that the government raise $10 billion under the program for 2014 and $6 billion for 2015. For 2016, the last year of the temporary program, $4 billion must be raised.

The law requires insurers to pay the fee on behalf of their fully insured employer clients, but it is widely expected that premium rates will be adjusted to reflect that new cost. Self-insured employers generally will pay the fee directly, although the ACA allows them to designate a “contributing entity,” which likely will be their third-party administrator.

HHS also proposed an exemption from the 2015 and 2016 fees for employers that have self-insured group health plans and do not use a third-party administrator for claims processing or adjudication, or for processing and communicating plan enrollment information.

The ACA specified that government revenue from the fees would be allocated to three purposes: a reinsurance fund on behalf of health insurers; a contribution to the U.S. treasury; and a payment for administrative expenses of the program. For 2015, for example, the allocations will be $6 billion to the reinsurance fund, $2 billion to the treasury and $25.4 million for administrative expenses.

The fees for a particular year will be collected in two installments in the following year. In January of 2015, 2016 and 2017, employers and insurers will pay for the reinsurance fund and the administrative costs. In the fourth quarter of those years, they will pay the contribution to the treasury. Employers are required to submit to the government by Nov. 15 of each benefit year the number of lives covered by their group health plans.

Sources of information for this report: HHS, Towers Watson, Coventry Health Care.