Benefits & Compensation News

Employers, get ready for Obamacare’s $63 per-person fee

Most people were in favor of the Obamacare mandate preventing health insurance companies from turning away individuals with pre-existing conditions. But two questions remained: How much would it cost — and who’d pay for it? Well, now we know.

The Department of Health and Human Services (HHS) just issued regulations addressing those very concerns.

The regs make it clear that beginning in 2014, the mandate will cost insurance companies $5.25 per health plan participant per month (or about $63 dollars per year) — a cost that will invariably be passed down to employers, then workers.

Self-insured companies will also have to pay the fee, which will fund the Transitional Reinsurance Program.

Where will the money go?

The money from the fee will be pooled in an account managed by the HHS. 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.

The rate was calculated based on the amount of money it was deemed the HHS needed for the program — $12 billion in the first year. That $12 billion was divided by the estimated total number of health plan participants in 2014, which brought the figure to $5.25 per month.

The fee is expected to be phased out after 2016 — unless Congress votes to extend it — and will decrease every year.

In 2015, the fee is expected to drop to about $42 per participant per year, which would raise $8 billion for the program.

In 2016, it’s expected to fall to nearly $26, which would raise another $5 billion.

The reinsurance fee is one part of the Obamacare law that had largely been overlooked, until recently when the HHS issued the regulations governing its administration.

When is it due?

Here’s a timeline for the collection process:

  • Nov. 15, 2014 — Plans must send headcount info to the HHS
  • Dec. 15, 2014 — The HHS will bill the plan’s administrator, and
  • Within 30 days of receiving the bill — Plans must pay the fee to the HHS.

The same dates will apply in 2015 and 2016.

Subscribe Today

Get the latest and greatest benefits and HR news and insights delivered to your inbox.
  • Mike

    Appears reasonable at first glance.