The Patient Protection and Affordable Care Act (also known as federal health care reform or ObamaCare), imposes an Insurer Fee on health insurance premiums that will increase the cost of buying health care coverage, beginning in 2014. The Insurer Fee is commonly called a “premium tax”. The amount of the Insurer Fee on the industry nationwide will be $8 billion in 2014, increasing to $14.3 billion in 2018, and will increase based on premium trend thereafter.
The requirement is scheduled to begin in 2014, with the first estimated Insurer Fee paid to the Internal Revenue Service by September 2014, based on 2013 data.
Purpose of the Insurer Fee
The Insurer Fee will fund subsidies for individuals and families with household incomes between 100 percent and 400 percent of the federal poverty level. These individuals and families will buy
their health insurance through health insurance exchanges, which launch in 2014, and with open enrollment beginning in October 2013.
How The Insurer Fee Works
The Insurer Fee is a permanent premium tax on most insurance companies starting in 2014. The requirement imposes an annual tax on the health insurance industry nationwide, according to the following schedule:
• $8 billion in 2014
• $11.3 billion in 2015
• $11.3 billion in 2016
• $13.9 billion in 2017
• $14.3 billion in 2018
• For years after 2018, the fee will be the amount from the previous year increased by the rate of premium growth
Fees will be prorated for each insurer based on its share of the nationwide premiums that are subject to the fee for the preceding calendar year.
Passing Down The Costs
ObamaCare does not permit insurance companies to deduct the Insurer Fee from their federal and state taxes. So naturally, insurance companies will be passing down these additional costs to their insured groups via increased premiums. For example, if carrier X’s tax rate is 20 percent requiring a payment of $80 in taxes, carrier X must collect $100 from its clients to pay the $80.
As time goes on, I’m sure we will learn about more “hidden” taxes and fees that relate to the new health care law.