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New health insurance fee likely to be passed on to consumer

By Catholic Online (NEWS CONSORTIUM)
December 11th, 2012
Catholic Online (www.catholic.org)

"Obamacare" comes at a price to employees and employers, analysts wish to remind us. More than likely, the added expense will be passed on to workers. It's estimated that the cost of covering those with pre-existing conditions will cost everyone $63 a head. This could cost the bigger employers tens of millions of dollars.

LOS ANGELES, CA (Catholic Online) - Employee benefits lawyer Chantel Sheaks has termed it a "sleeper issue" with significant financial consequences. "Especially at a time when we are facing economic uncertainty, (companies will) be hit with a multi-million dollar assessment without getting anything back for it," Sheaks, a principal at Buck Consultants, a Xerox subsidiary says.

Employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee, based upon figures listed in the regulation. The Obama administration maintains that this is a temporary assessment levied for three years starting in 2014. Intended to raise $25 billion, the fee begins at $63 and then goes down.

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

According to the White House, the program "is intended to help millions of Americans purchase affordable health insurance, reduce unreimbursed usage of hospital and other medical facilities by the uninsured and thereby lower medical expenses and premiums for all." Five billion dollars will go directly to the U.S. Treasury, ostensibly to offset the cost of shoring up employer-sponsored coverage for early retirees.

The $25 billion fee is part of a bigger package of taxes and fees to finance Obama's 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 these amounts also face an additional 3.8 percent tax on their investment income.

However, the insurance fee has not been properly addressed as employers have focused on other costs in the law. These include 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," Gretchen Young, senior vice president for health policy at the ERISA Industry Committee says. The committee represents large employers on benefits issues.

Young explains that this became apparent in the spring, but hard cost estimates surfaced only recently with the new regulation. It set the per capita rate at $5.25 per month, which works out to $63 a year.

Employers that are already offering coverage to their workers don't understand why they need to contribute to the stabilization fund, which mainly helps the individual insurance market. The redistribution puts the biggest companies on the hook for tens of millions of dollars.

The fee will total $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016, the per-head assessment declining around $40 in 2015 from $63.

It will phase out completely in 2017, unless Congress, with lawmakers searching everywhere for revenue to reduce federal deficits decides to extend it.

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