Health care 'sleeper' fee to hit in 2014
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 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.
“Small businesses are already taking it on the chin,” said Steve Shivak, president of SMC Business Councils, a Churchill-based trade group that represents about 1,500 Pennsylvania small businesses.
Companies are dealing with rapidly rising health care costs, and any additional expense puts further pressure on employers, Shivak said.
Employee benefits lawyer Chantel Sheaks called 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 multimillion-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 said it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion. The fee starts at $63 a person and then declines.
Most of the money will go into a fund administered by the Department of Health and Human Services. It will be used to cushion health insurance companies from the initial hard-to-predict costs of covering uninsured people with chronic medical problems, such as heart disease and diabetes. 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 said 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 amounts 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.
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, Young said, 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.
Trib Total Media staff writer Alex Nixon contributed to this report.