The Latest on ACA Taxes & Fees

Volume 7, Issue 2 • January 16, 2013

► Blue Alert 

Temporary freeze on early renewal and quote requests, plus the latest on ACA taxes and fees

Early renewals
As a result of several health care reform changes and impacts, Group Underwriting is suspending 2014 early renewal and quote requests for BCBSM and BCN. This freeze, which is effective immediately, also impacts the processing of RFIs and RFPs.

Early renewals are generally requested by key and large group customers six to 10 months in advance of their renewal date. Renewal packages are normally issued 120 to 90 days prior to the group’s renewal date.

Group Underwriting will reinstate early renewal and quoting once the 2014 base rate tables are available, which is targeted for August 2013.

Taxes and Fees
One objective of the Affordable Care Act is to increase the number of Americans who are covered by health insurance. To achieve this goal, the government introduced a number of taxes and fees intended to raise revenues to support the individual health insurance market, help fund the state and federal Exchanges and assist with research that compares treatment effectiveness.

Federal Insurance Premium Tax
One of the new taxes and fees established under the ACA is the Federal Insurance Premium Tax, which is based on fully insured premiums written. In previous communications, we referred to this tax as the “Market Share tax,” but updated the name so that our customers clearly understand the intent of this federal tax. In addition, the new name aligns with the naming conventions set by America’s Health Insurance Plan, the national trade association that represents the health insurance industry.

Comparative Effectiveness Fee
This fee will help fund health outcomes and comparative clinical effectiveness research conducted or financed by the Patient Centered Outcomes Research Institute or PCORI.

Here are some important facts about the fee:

  • Initially the comparative effectiveness fee will impose a $1 fee per covered life for plan years on or after Oct. 1, 2012, and before Oct. 1, 2013, that will increase to $2 per covered life for plan years ending on or after Oct. 1, 2013.
  • The fee is set to expire in 2019.
  • The ACA requires that health insurance issuers pay the fee for fully insured business.
  • The first payments are due to the IRS by July 31, 2013, or July 31, 2014, depending on the date of the last day of the plan or policy year.
  • The Comparative Effectiveness fee does not apply to Medicare Advantage, Medicare Part D, Medicaid, MIChild and individual Medigap, HIPAA-excepted benefits such as standalone dental or vision plans and certain health FSAs, HRAs or employee assistance programs.

BCBSM and BCN will make the first payment for the comparative effectiveness fee on July 31, 2013, for fully insured business without prior collection from our individual and group customers. This quarter payment will be absorbed by current administrative fees as systems and processes are modified internally to support collection of this fee effective 2014 and beyond. This is a one-time, isolated occurrence.

The plan sponsor, usually the employer, is responsible for paying the fee directly to the IRS for self-insured business. We will provide account managers with job aids and materials to assist them in discussions about the fee with their ASC customers.

Additional information
We’ve developed an FAQ (PDF) with the latest information about the Federal Insurance Premium Tax, Comparative Effectiveness Fee and subsequent ACA taxes and fees. We will update the FAQ regularly as we receive more guidance from the government.