Surprise: New Insurance Fee in Health Overhaul Law

December 12, 2012

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, says the Associated Press.

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.

  • 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. 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.

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.

  • 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.

Source: Ricardo Alonso-Zaldivar, "Surprise: New Insurance Fee in Health Overhaul Law," Associated Press, December 10, 2012.

 

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