The Patient Protection and Affordable Care Act (PPACA) imposes a new fee on "specified health insurance policies" and "applicable self-insured health plans" effective for plan years ending after Sept. 30, 2012. The new fee, according to IRS guidance, will be based on "the average number of lives covered under the policy or plan," IRS officials say in the notice.
Health policy issuers would pay a fee of $2 per life covered, indexed for the national health care inflation rate. According to the IRS, an insurer would use the average number of lives covered when computing the fee payment.
The fee also applies to sponsors of self-insured plans as they would also pay a fee equal to $2 multiplied by the average number of lives covered, adjusted for health care inflation.
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The IRS is asking for comments about how it should go about using fees from health insurers and sponsors of self-insured health plans to pay for comparative clinical effectiveness research. Written comments are accepted until Sept. 6. An overview of the Patient Centered Outcomes Research program and the request for comment are available at: http://www.irs.gov/pub/irs-drop/n-11-35.pdf.
This new fee is just one example of the PPACA's complex funding mechanisms that offset the costs associated with expanding health coverage through Medicaid and the health insurance exchanges. These fees will likely cause higher health insurance premiums as the costs are passed on to self-funded plan members.
In fact, some might argue this specific fee aims to directly increase costs of self-funded plans so that more of the larger small-group employers will elect to access health coverage through health insurance exchanges rather than shift from fully insured to self-insured status. This may occur as the typical acknowledged threshold for business owners to begin looking at self-funding has been decreasing to the 75-100 employee business size. With health insurance exchanges beginning operations in January 2014 and being the source of coverage for groups up to 100 employees, this new fee may dissuade some employers with 80-plus employees from moving toward self-funding.
The state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges will allow individuals and small businesses with up to 100 employees to purchase coverage. States have the option in 2017 of allowing businesses with more than 100 employees to purchase coverage in the SHOP Exchange.
What do you think of this new fee and its effect on the self-funded market? Will you provide comment to the IRS and if so what would you tell them?
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