Obamacare Charges New Fee for Self-Insured Employers

Obamacare Charges New Fee for Self-Insured Employers
October 18, 2013

Eric Boehm

Eric Boehm writes for the Pennsylvania Independent, where this column first appeared. (read full bio)

A new annual fee of $1 per person covered is now being charged to health insurance plans and employers for companies that self-insure.

The fee was created by President Obama’s health care law and will be used to fund a new federal initiative designed to study the effectiveness of health care treatment and outcomes.

“It’s something new, so I think there has been a fair amount of confusion and questions about how does this apply to me,” said Kevin Wadle, tax director for Clifton Allen Larson, a national public accounting firm. “Employers, including small employers, are being burdened by taxes and fees that they have never had to worry about before.”

Wadle said information about the new fee has not been widely publicized by the IRS and government. The form businesses must use to pay the fee was not issued by the IRS until June. He said some of his clients mistakenly believed the new fee was also postponed for a year when the Obama administration decided in early July to unilaterally postpone other aspects of Obama’s law. It remains in effect.

Individuals Won’t See Fee

For individuals who buy health insurance through a large provider like Blue Cross, the fee will be baked into the overall purchase price of their health care plans. Businesses that self-insure will have to pay $1 for each person covered by their plans, which includes employees’ spouses and dependents.

Businesses that offer health reimbursement accounts or other flexible spending options will likely also have to pay the new fee.

Though the levy is nominal and likely won’t be felt by most consumers, it does add a layer of paperwork—businesses that self-insure will have to fill out a new tax form previously only used by companies paying oil and gas excise taxes—and some additional costs.

“It’s another one of these nickel-and-dime taxes in the law,” said Cynthia Magnuson-Allen, spokeswoman for the National Federation of Independent Business, which is lobbying to repeal the entire health care law.

Fee Set to Double

The IRS has not released projections of how much revenue the new $1 per-person fee will generate, but it will be used to fund the Patient Centered Outcomes Research Initiative, which will study the effectiveness of treatment options and provide analysis of outcomes for Medicare and private insurance. The per-person rate will double to $2 in 2014, and after that it will be set by the federal government on an annual basis, meaning it could go even higher, Wadle said.

According to the PCORI website, it expects to receive $3.5 billion between now and 2019 to fund operations. It has already handed out $159.3 million to fund 126 research projects in 33 states, according to Christine Stencel, a spokeswoman for PCORI.

The fee is scheduled to end after 2019, when PCORI’s charter expires. 

Eric Boehm

Eric Boehm writes for the Pennsylvania Independent, where this column first appeared. (read full bio)