Business owners face taxes for employer-sponsored group health plans

With the passage of Health Care Reform through the Patient Protection and Affordable Care Act,  many Americans wondered how the  federal government would fund the high cost of providing government subsidized health insurance.  That question was quickly answered, ant the answer is taxes.  Business owners have begun to feel the heavy burden of multiple taxes being levied on their employer-sponsored group health plans and several new taxes took effect on January 1 of this year.  Following is a list of the taxes, what groups they apply to, and what they will be used for:

Health Insurance Industry Fee:  This is the largest tax which will be used to fund the cost of the Health Marketplace insurance costs.  For 2014 the expected cost could range between 2-2.5 percent of total premium of the group health plan.  In 2015 and beyond, this tax could increase to between 3-4 percent.  This tax applies to all fully insured plans, both small group and large group.  The fee does not apply to self-funded group health plans.

Transitional Reinsurance Program: Used for the re-insurance policy applied to each Marketplace plan, this tax will cost  $5.25 per member (not per subscriber, but for each person on the employer’s health contract).  This fee began on January 1, 2014 and applies to all fully insured-group health plans, both small group and large, and all self-funded plans.  This tax may be reduced in following years; final guidance has not been given.

Patient-Centered Outcomes Research Fee:  Started in 2012, this fee is used to fund a research program for which findings on clinical effectiveness are used to assist patients and providers make educated medical decisions.  The fee is $1 per covered member for the first plan year ending on or after Oct. 1, 2012, and $2 per member per year after the first year.  Medical inflation may be applied in consecutive plan years.  The fee is scheduled to continue through 2019. It applies to all fully insured and self-funded plans.

Risk Adjustment Admin Fee: Will be used to fund the administration of subsidizing plans that have less-than-average health status by assessing plans with above-average health status.  It is applied to small group employer plans only.

Many insurance carriers have adjusted their underwriting process to include these taxes, and have added them to the total monthly premium of employer-sponsored group health plans.  Other carriers, such as Blue Cross and Blue Shield of Michigan, are adding the taxes as a separate line item on the monthly invoice.

BCN Services will monitor any changes or further guidance to the tax assessments on employer-sponsored plans and will communicate any relevant information.  As always, if you have any questions, please contact your Partnership Manager.




Frank Lewandowski, Partnership Manager

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