Healthcare Reform Fees & Taxes PATIENT PROTECTION AND AFFORDABLE CARE ACT

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Comparative Effectiveness Research Fee

SELF FUNDED, FULLY INSURED AND SMALL GROUP PLANS The healthcare reform law establishes a new Patient-Centered Outcomes Research Institute (PCORI) to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing comparative clinical effectiveness research. The research conducted through this new institute will be paid for by a new Patient-Centered Outcomes Research Trust Fund. The PCORI will be partly funded through the comparative effectiveness research (CER) fees payable by issuers of health insurance policies and sponsors of self-insured health plans.

Health plans and self funded groups are required to pay the CER fee of one dollar per covered life effective for plan years ending on or after October 1, 2012. The fee adjusts to two dollars per covered life for plan years ending October 1, 2013, through September 30, 2014. After September 30, 2014, the amount will be determined based upon the percentage increase of National Health Expenditures data released by the Department of Health and Human Services (HHS)

annually until plan years ending September 30, 2019, at which time the CER fee will no longer be applicable. The regulations do not exclude retiree-only health plans. Employers and insurance carriers will need to include retirees when they calculate average covered lives. Based on the established rate, the estimated amount to be paid by Blue Cross fully insured customers is on average $1.95 million per year from 2013 to 2019. Self funded groups will be responsible for paying this fee and insurers are not allowed to pay or calculate the fee on their behalf.

Because these new fees

and taxes will affect your

premiums or administrative

fees, it is important for you

to understand their impact.

We have provided a brief

overview of each fee or tax

along with a chart which

summarizes everything for

you, including how these

fees and taxes will be

displayed on your

billing statement.

The healthcare reform

law contains a number

of tax law changes

beginning with the

2013 tax year and

imposes several fees

associated with group

healthcare plans.

July 2012

Healthcare Reform

Fees

&

Taxes

OVERVIEW

MAY 2013

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Transitional Reinsurance Program Fee

SELF FUNDED, FULLY INSURED AND SMALL GROUP PLANS

The healthcare reform law establishes a reinsurance program beginning in 2014 and extending through 2016. This program provides funding to assist health insurers with the

additional cost associated with insuring high risk individuals through the individual market. Health plans will be subject to a per capita contribution to fund the reinsurance pool and the administration of the program. Total contributions for the reinsurance program

are $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. HHS issued a final rule on March 11, 2013 setting the rate for 2014 at $5.25 per member per month or $63 per member per year. This rate is expected to decrease in

2015 and 2016. The final rule also states that self funded groups are responsible for the payment of this fee and health insurers are required to pay the fee on behalf of their underwritten groups. Beginning October 2014, Blue Cross will provide a report on GroupAccess each October through 2016 to help self funded groups determine their enrollment count. Self funded groups must report the number of covered lives on their plan to

HHS by November 15 of each year the fee is to be paid. Blue Cross will calculate the enrollment count for all of our underwritten groups, submit the total counts to HHS by November 15 and make the total payment. The estimated amount Blue Cross underwritten customers will pay for reinsurance fees will be $57 million in 2014, $38 million in 2015 and $24 million in 2016.

Health Insurer Tax

FULLY INSURED AND SMALL GROUP PLANS Health insurers will have to pay an annual

excise tax that will help fund the premium subsidies and tax credits that will be available to individuals who are purchasing health insurance on the

exchanges, also known as the Health Insurance Marketplace. This tax is a fixed-dollar amount distributed across all health insurance carriers and is based on each carrier’s share of national net premiums written in the previous year. The total fee for all insurers is $8 billion in 2014, $11.3 billion in 2015-2016, $13.9 billion in 2017, and $14.3 billion in 2018. After 2018, the tax rises according to an index based on net premium growth. The 2014 tax will be based on 2013 premiums. We currently estimate the average tax obligation for Blue Cross customers will be approximately 2.2 percent of underwritten premium from 2014 to 2019.

High Cost Insurance Tax (Cadillac Tax)

SELF FUNDED, FULLY INSURED AND SMALL GROUP PLANS

The high-cost insurance tax, or “Cadillac Tax”, goes into effect for tax years beginning January 1, 2018. This will impose a 40 percent excise tax on health

plans that cost more than $10,200 for single coverage and $27,500 for family coverage annually. This tax is intended to discourage high-premium health plans which some argue tend to encourage overuse of medical care.

2018

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Exchange User Fee

BLUE CROSS SMALL GROUP PLANS ONLY Health insurers that offer plans on the federal

exchange in 2014 will have to “pay to play.” HHS has announced that beginning in 2014, a user fee will be collected from health insurance issuers participating in states where the federal government will be operating the exchange. This fee will help support the operations of an exchange in these states. At this time, the state of Alabama has indicated it will not operate a state-based exchange. Therefore, Blue Cross and our small group customers must pay the HHS proposed user fee of 3.5 percent of monthly premiums on plans offered through the exchange.

Risk Adjustment User Fee

BLUE CROSS SMALL GROUP PLANS ONLY

The new healthcare law requires risk adjustment for non-grandfathered individual and small group plans both on and off the health insurance exchange. Risk adjustment reallocates premium income among plans to account for differences in enrolled members’ overall health and the corresponding cost. If a state does not establish a system to perform this risk adjustment, then HHS will create and operate one for that state. The state of Alabama will not create a risk adjustment program. Health insurers in states that opt out of operating their own risk adjustment programs must pay HHS a user fee for the operation of a federal risk adjustment program. The fee will help fund the administrative cost of running the

program and is assessed based on the number of enrollees in risk adjustment covered plans. HHS has issued a proposed rule stating the estimated total cost for HHS to operate the risk adjustment program on behalf of states for 2014 would be less than $20 million and the fee will be no more than $1 per enrollee per year.

You can depend

on Blue Cross and

Blue Shield of Alabama

to guide you through

healthcare reform

and the changes

that come with it.

Healthcare Reform Summary of Fees & Taxes

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Healthcar

e R

eform Summary of Fees and T

axes

Blue Cross and Blue Shield of Alabama is an independent licensee of the Blue Cross and Blue Shield Association. MA

Y 2013

Tax / F

ee

Description

Effective Date and Duration

Amount

Business Affected

How will fee be billed?

FULL

Y INSURED

SELF FUNDED

Comparative Effectiveness Research F

ee

(P

atient Centered

Outcomes Research Institute - PCORI)

Fund designed to aid in the research and evaluation of health outcomes and clinical effectiveness. P

rovides patients with

evidence-based infor

mation to make better infor

med

medical decisions.

For policies ending October 1, 2012 through September 30, 2019

$1 per member per year

- Plan years ending on or af

ter

October 1, 2012 through September 30, 2013.

$2 per

member per year

- Plan years ending on or af

ter October

1, 2013 through September 30, 2014.

Amounts beginning

for plan years on or after October 1, 2014

will be based

on previous year

’s rate plus medical inflation.

Self F unded and F ully In su re d/ Sma ll Group Plans

Included in your premium beginning with July 2013 renewals. Responsibility of the group to pay and self

-repor t on Excise T ax F or m 720.

Transitional Reinsurance Program F

ee

Provides funding to assist health insurers with the additional cost associated with insuring high risk individuals in the individual market.

Januar

y 2014 -

December 2016

$5.25 per member per month or $63 per member for benefit year 2014. Note: $25 billion will be collected over a three-year period in the amounts of $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016.

Self F unded and F ully In su re d/ Sma ll Group Plans

Identified on your billing statement beginning Januar

y 1

, 2014.

Small Group beginning July 1, 2013. Responsibility of the

group to pay

.

Blue Cross will provide repor

ts each October

on GroupAccess to help you deter

mine enrollment count. High-Cost Insurance T ax (Cadillac T ax)

This tax is intended to discourage high- premium health plans which some argue tend to encourage over

use of medical care.

Januar

y 2018

and beyond (per

manent)

Imposes a 40 percent excise tax on health plans that cost more than $10,200 for single coverage and $27,500 for family coverage annually

. Self F unded and F ully In su re d/ Sma ll Group Plans To be deter mined. To be deter mined. Health Insurer T ax

Annual non-deductible excise tax to help fund the premium subsidies and tax credits that will be available to individuals who are purchasing health insurance on the exchanges, also known as the Health Insurance Marketplace.

Januar

y 2014

and beyond (per

manent)

Approximately 2.2% of under

written premium from

2014-2019.

Note:

This tax is a fixed-dollar amount

distributed across all health insurance car

riers and is

based on each car

rier

’s share of national net premiums

written in the previous year

. The total fee for all insurers

is $8 billion in 2014, $11.3 billion in 2015-2016, $13.9 billion in 2017, and $14.3 billion in 2018. Af

ter 2018,

the tax rises according to an index based on net premium growth. Fully Insured/ Small Group Plans

Identified on your billing statement beginning Januar

y 1

, 2014.

Small Group beginning July 1, 2013.

Not applicable.

Exchange User Fee

This fee will help suppor

t the operation of

an exchange in par

ticipating states where

the federal gover

nment will be operating the

exchange. At this time, the state of Alabama has indicated it will not operate a state-based exchange.

Januar

y 2014

and beyond (per

manent)

3.5 percent of monthly premiums on plans offered through the exchange. Blue Cross Small Group Plans Only Identified on your billing statement beginning with plan years on or af

ter

Januar

y 1, 2014.

Not applicable.

Risk Adjustment User F

ee

This fee will help suppor

t the operation of a

risk adjustment program in par

ticipating states

where the federal gover

nment will be operating

the program. At this time, the state of Alabama has indicated it will not operate a state-based program. The fee is assessed based on the number of enrollees in risk adjustment covered plans sold on the exchange.

Januar

y 2014

and beyond (per

manent)

Estimated to be no more than $1 per enrollee per year

.

Blue Cross Small Group Plans Only Identified on your billing statement beginning with plan years on or af

ter

Januar

y 1, 2014.

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HCRAlabamaBlue.com

An Independent Licensee of the Blue Cross and Blue Shield Association

The content provided in this brochure is for general informational purposes only. Various provisions of the Affordable Care Act (healthcare reform) and its regulations are yet to be published or finalized and are subject to change. Therefore, the content may not be up to date at the time of viewing. As the information provided herein may not be applicable in all situations, it should not be acted upon without specific legal advice based on your particular facts.

HCRAlabamaBlue.com

And while you’re there, sign up to receive

healthcare reform updates by email.

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you

For more information about healthcare reform

and how it may impact you or your business,

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An Independent Licensee of the Blue Cross and Blue Shield Association

The content provided in this brochure is for general informational purposes only. Various provisions of the Affordable Care Act (healthcare reform) and its regulations are yet to be published or finalized and are subject to change. Therefore, the content may not be up to date at the time of viewing. As the information provided herein may not be applicable in all situations, it should not be acted upon without specific legal advice based on your particular facts.

MAY 2013

HCRAlabamaBlue.com

An Independent Licensee of the Blue Cross and Blue Shield Association

Figure

Updating...

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