This fee supports a transitional reinsurance program for the individual market in each state from 2014 through 2016 to stabilize the market while other provisions of the ACA are implemented. All health insurance carriers and TPAs, on behalf of self-insured group health plans, submit ACA reinsurance fee contributions. The ACA reinsurance fee for 2014 is $63 annually or $5.25 per member per month.
Health Insurance Company Premium Tax
This annual tax on health insurers is based on their market share of net premiums, or the sum of premiums earned from all policies during the previous year. The total amount to be collected across all health insurers in 2014, the first year of the tax, is $8 billion and increases each year thereafter. Not-for-profit insurers are assessed the fee based on half the value of their net premiums. Harvard Pilgrim, for example, has incorporated approximately 1% – 2% of premium for this tax.
Comparative Effectiveness Research Fee
The ACA created the Patient-Centered Outcomes Research Institute (PCORI) to conduct research to evaluate and compare health outcomes and the clinical effectiveness, risks and benefits of various medical treatments. Insurers and self-insured plans are required to pay a fee to fund this agency. Plans on a calendar-year basis will pay the fees for the 2012 through 2018 plan years. For plans not on a calendar-year basis, the fee applies to the first plan year ending on or after October 1, 2012. The fees do not apply to plan years ending after September 30, 2019. Some Massachusetts carriers began including this fee in their fully insured rates in 2012.
In the first year, the fee is $1 per member per year. In the second and subsequent years, the fee will be $2 per member per year. Under a proposed rule that hasn’t yet been finalized, plan sponsors of self-insured plans would be required to file a Form 720 “Quarterly Federal Excise Tax Return” annually that states their fee liability. The fee itself would be paid annually by July 31 of the calendar year immediately following the last day of the plan year. So for a self-insured plan with a plan year that ended on December 31, 2012, the first fee payment will be due by July 31, 2013.
Employer Tax Deduction for Retiree Drug Coverage Eliminated
As of January 1, 2013, employers who provide drug coverage for their retirees under Medicare Part D no longer receive a tax deduction for the subsidy payments they receive.
Excise Tax on High-Cost Plans
The so-called “Cadillac” tax will be effective in 2018. Under this provision, a 40% excise tax will be levied on the value of employer-sponsored coverage in excess of $10,200 for individual coverage and $27,500 for family coverage. The dollar thresholds are indexed to the Consumer Price Index (CPI) plus 1% in 2019 and to the CPI only in the years that follow. Retirees who are at least 55 but not yet eligible for Medicare and persons employed in certain high-risk professions such as firefighting, construction, mining, etc. have higher dollar thresholds before the tax applies.
Medicare Tax Increase on Higher Income Individuals
Effective January 1, 2013, the current Medicare payroll tax rate of 1.45% on wages increased by 0.9% on earned income exceeding $200,000 for persons filing an individual return and $250,000 for persons filing a joint return. There is also a 3.8% assessment on unearned income.
Medical Device Company Tax
Effective January 1, 2014, the ACA imposes an excise tax of 2.3% on the sale of any taxable medical device. The tax applies to both manufacturers and importers of medical devices. The tax does not apply to eyeglasses, contact lenses, hearing aids and devices sold at retail stores for individual use.
