|Health Reform Fees to Affect Premiums, Rates
New fees will apply to fund several of the changes mandated by the health reform law – the Affordable Care Act (ACA). The fees fund patient-centered outcomes research, the Transitional Reinsurance Program and premium tax subsidies for individuals purchasing insurance through Health Benefit Exchanges. Fully insured plans will be affected by the following:
Patient-Centered Outcomes Research Institute (PCORI) Fee, 2012-2019
The Patient-centered Outcomes Research Institute (PCORI) Fees fund research that evaluates and compares health outcomes, clinical effectiveness, risks and benefits of medical treatments and services. The research will help patients, health care professionals and policymakers make better informed decisions about treatment options.
Starting with plan years ending after October 2012, health insurance issuers and employers sponsoring self-funded group health plans must pay $1 per member per year to fund the PCORI research fee. The fee increases to $2 per member per year in the second year. Then, the fee adjusts based on the percentage increase in the projected per capita amount of national health expenditures.
In the case of fully insured coverage, UnitedHealthcare is responsible for filing Form 720 and paying the required PCORI research fee. The fee will be rolled into the premium rates and will not be called out separately on the invoice.
The PCORI research fee is due by July 31 of the calendar year immediately following the last day of the plan year, so, the 2012 fee must be paid by July 31, 2013.
According to PCORI, it receives income from two funding streams: the general fund of the Treasury, and the fee assessed on Medicare, private health insurance and self-funded plans. PCORI is expected to receive an estimated $3.5 billion over the life of the Institute.
Transitional Reinsurance Fee, 2014-2016
The Transitional Reinsurance Fee is collected from health insurance issuers and third-party administrators (TPAs) on behalf of self-funded group health plans to fund the Transitional Reinsurance Program. The program distributes the funds to insurers in the non-grandfathered individual market that disproportionately attract individuals at risk for high medical costs. The intent is to spread the financial risk across all health insurers to provide greater financial stability. The Reinsurance Program will exist for the first three years of the Exchanges’ operation (2014-2016).
The Reinsurance Fee will be collected through premium rates when approved by the state for fully insured clients. The first payment is expected to be due on Jan. 15, 2014, but final guidance from the federal government on the amount and timing of the payments is forthcoming.
The quarterly fee is assessed on a per capita basis. Use of a per capita assessment may lead to multiple payments when a group purchases more than one policy or plan that is subject to the Transitional Reinsurance Fee or the PCORI Fee. The issuer or a self-funded group with two policies or plans may pay the fee twice for the same covered life.
The impact of the Transitional Reinsurance Fee, based on the government rule and industry analysis, is about $6 per member per month for the first year.
The health reform law specifies the total amounts of the Reinsurance Fee that must be collected for the Reinsurance Program is $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016, totaling $25 billion.
Insurer Fee, 2014 - Permanent
The Insurer Fee, also called the health insurance industry tax or premium tax, is an annual, permanent fee on health insurance issuers beginning in 2014. The fee will fund premium tax subsidies for low-income individuals and families purchasing insurance through the Exchanges launching in 2014.
The amount of the Insurer Fee is determined by the market share of the health insurance issuer. It is based on its net written health insurance premiums in the previous year, with certain exclusions.
While UnitedHealthcare has not received final federal guidance on the Insurer Fee, the impact of the fee, based on the government rule and industry analysis, is about 2.3% of the premium the first year. The Insurer Fee also applies to stand-alone dental and vision plans.
The Insurer Fee applies only to health insurance issuers, like UnitedHealthcare. Therefore, it affects fully insured business only. The Insurer Fee imposed on the health insurance industry is $8 billion in 2014 increasing each year to $14.3 billion in 2018, and indexed to premium trend thereafter.
Fee Collection and Payment Summary
While the fees have different effective dates, fully insured health plans will start seeing these fees prorated into their premiums, when approved by the states.
The PCORI research fee is included in the premiums for fully insured clients, and UnitedHealthcare will start progressively incorporating the fees into premiums for the Insurer Fee and the Transitional Reinsurance Fee beginning Feb 1, 2013, as renewals or new business cases begin and state regulatory approvals are received.
Because groups with a February 2013 effective date will have one month of coverage (January 2014), the fee for this month is included in the 2013 rates. Likewise, groups with a March 1 effective date will have two months of impact, groups with an April 1 effective date will have three months of impact, etc. The fees are prorated, so they are spread over 12 months.
A footnote acknowledging the fees will appear on quotes, renewal packages and invoices. (Because the PCORI fee is nominal, it will not be referenced in the footnote.)
Health Reform Fee Financial Impact
For fully insured clients, the cumulative impact of the health reform fees in 2014, based on the government rule and industry analysis, shows an estimated increase in the premium by about 3.8%.
For More Information
To learn more about taxes and fees and other health reform changes impacting employers, review:
Please contact your UnitedHealthcare representative if you have questions about these health reform topics or fees.