Benefits & Compensation News

5 new Obamacare taxes employers will pay in 2014

It’s been a long and painful road for businesses, insurers and the federal government since the Affordable Care Act was passed in the winter of 2010. But Obamacare has been fully introduced to America. One of the results: A higher tax bill for employers.

The healthcare reform law has imposed numerous tax increases that businesses won’t see or feel directly. Most of the taxes will simply ratchet up the cost of the health coverage businesses obtain for their employees — because the taxes are levied against insurers and other organizations that affect the cost of coverage and will pass the costs on to policy holders (employers).

Most businesses will only feel the tax hit through an increase in health plan premiums. But Blue Cross Blue Shield is letting customers in several states know exactly where the increases are coming from. Blue Cross of Alabama even created a separate line item on its bills called “Affordable Care Act Fees and Taxes.”

The new Obamacare taxes being passed on to health insurance plan sponsors in 2014:

  • Health insurance industry fee. Obamacare imposes a 2% to 2.5% flat tax on the premiums health insurers take in. The tax applies to medical, dental and vision plans.
  • Comparative effectiveness research fee. For plan years ending on and after Oct. 1, 2012 through Sept. 30, 2019, all employer health plans must pay an annual fee to support “patient-centered outcomes research.” The fee was $1 per covered life the first year (2013 for calendar-year plans), and it doubles to $2 in the second plan year. It’s then adjusted for inflation during the final five years. Fees for the previous year are due July 31 every year.
  • Reinsurance program fee. In 2014, insurers will have to pay a fee of $5.25 per health plan participant per month ($63 per year). Self-insured companies will also have to pay the fee. The money will fund the Transitional Reinsurance Program. In 2015, the fee is expected to drop to about $42 per participant per year. In 2016, it’s expected to fall to about $26. The money from the fee will be pooled in an account managed by The Department of Health and Human Services. It will be used to reimburse insurance companies who end up covering a large share of individuals with pre-existing conditions. Those insurers will be eligible for reimbursement of a percentage of those individuals’ claims that exceed a specified amount.
  • Health exchange user fee. Insurers are being charged a 3.5% user fee for the right to sell policies on the federal exchange marketplace.
  • New Medicare surtax. High-earning individual tax filers, like some business owners, making more than $200,000 and families earning more than $250,000 will pay an added 0.9% Medicare surtax on top of the existing 1.45% Medicare payroll tax for any wages made in excess of those amounts. They’ll also pay an extra 3.8% Medicare tax on unearned income, such as investment dividends, rental income and capital gains. These changes affect 2013 taxes filed in 2014.
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