Health overhaul has surprise fee

Big employers say the per-person charge will cost millions. Workers will likely pay.

Posted: December 12, 2012

WASHINGTON - Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with preexisting conditions under the health-care overhaul.

The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers.

Employee benefits lawyer Chantel Sheaks calls it a "sleeper issue" with significant financial consequences, particularly for large employers.

"Especially at a time when we are facing economic uncertainty, [companies will] be hit with a multimillion-dollar assessment without getting anything back for it," said Sheaks, a principal at Buck Consultants, a Xerox subsidiary.

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee.

The Obama administration says it is a temporary assessment to be levied for three years starting in 2014 and is designed to raise $25 billion. It starts at $63 and then declines.

Most of the money will go into a fund administered by the Health and Human Services Department. It will be used to cushion health insurance companies from the initial hard-to-predict costs of covering uninsured people with medical problems. Under the law, insurers will be forbidden from turning away the sick as of Jan. 1, 2014.

The program is meant to help millions of Americans buy "affordable health insurance, reduce unreimbursed usage of hospital and other medical facilities by the uninsured, and thereby lower medical expenses and premiums for all," the Obama administration says. An accompanying media fact sheet issued Nov. 30 spoke of "contributions" without detailing the program's cost and scope.

Of the total pot, $5 billion will go to the U.S. Treasury, apparently to offset the cost of shoring up employer-sponsored coverage for early retirees.

The $25 billion fee is part of a package of taxes and fees to finance the expansion of coverage to the uninsured. It all comes to about $700 billion over 10 years, and includes higher Medicare taxes effective this Jan. 1 on individuals making more than $200,000 per year or couples making more than $250,000. People above those threshold amounts also face an additional 3.8 percent tax on their investment income.

But the insurance fee had been overlooked as employers focused on other costs in the law, including fines for medium and large firms that don't provide coverage.

"This kind of came out of the blue and was a surprisingly large amount," said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee, a group that represents large employers on benefits issues.

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