Fees and Taxes

PPACA established several new fees and taxes designed to generate revenue to help fund expanded programs and services. Employers will pay some of these fees while others will be paid by insurers and individuals.

Employer Fees
Individual Fees

Fees and taxes that apply to employers and insurers

  • Comparative Effectiveness Research Fee – Funds the Patient-Centered Outcomes Research Institute, which conducts research to compare which of two or more treatments is most effective
  • Health Insurance Industry Fee – Helps fund PPACA implementation
  • Reinsurance Assessment – Reimburses companies that insure high cost individuals in the individual insurance market

  Comparative Effectiveness Research Fee Health Insurance Industry Fee Reinsurance Assessment
Applies to Insured and self-insured medical plans Insured medical, dental and vision plans Insured and self-insured medical plans
Effective
  • Through 2019
  • Effective for plan years beginning on or after 10/2/11
  • First payment due for many plans 7/31/13
 Begins in 2014 2014 – 2016
Cost impact
  • Annual fee of $1 per participant, increasing to $2, then indexed
  • IS tax-deductible
  • 2% – 2.5% of premium in 2014
  • 3% – 4% of premium in future years
  • NOT tax-deductible
  • $63 per member per year (PMPY) in 2014
  • $40 – $45 PMPY in 2015
  • $25 – $30 PMPY in 2016
  • IS tax-deductible
Who pays
  • Insured: Insurer pays; built into rates
  • ASO: Employer calculates and pays
 Insurer pays; built into rates; partial load in 2013
  • Insured: Insurer pays; built into rates; partial load in 2013
  • ASO: Employer is responsible; employer may choose to have administrator pay

For additional information, see our:

Fees and Taxes Fact Sheet
CERF Fact Sheet
Health Insurance Industry Fee Fact Sheet
Reinsurance Assessment Fact Sheet
Frequently Asked Questions
Reform Today Column: Primer on PPACA's New Fees and Taxes

Other fees and taxes that may apply to employers

  Elimination of the Medicare Part D Employer Subsidy for Rx Employer Mandate Cadillac Tax
Overview Eliminates deduction for Medicare Part D employer subsidy for retiree prescription drug coverage Fines employers with 50+ full-time employees (FTE) or full-time equivalents who do not provide coverage that is:
  • Affordable (costs less than 9.5% of employee’s W-2 wages)
  • Provides “minimum value” (covers 60%+ of costs)
Penalties:
  • No coverage: $2,000 per FTE (minus first 30)
  • Not affordable and/or not minimum value: Lesser of $3,000 per FTE receiving tax credit or $2,000 per FTE (minus first 30)
  • Tax on plans with generous benefits
  • A 40% excise tax on high cost health plans that exceed $10,200 for individual and $27,500 for family coverage
Effective 2013 2014 2018
Cost impact Varies by employer Depends if employer needs to adjust plan to be compliant or is penalized Actual impact TBD based on final regulations

 

New restrictions, penalties and taxes that may apply to individuals

  Tanning Tax Over-the-counter (OTC) Drugs for FSA, HRA, HSA Tax on Withdrawals from HSAs/ Archer MSA not Spent on Health Care FSA Limits
Overview Tax on indoor tanning services No reimbursement for OTC drugs from health accounts without a prescription Increases penalty for non-qualified withdrawals from health accounts Limits each person’s annual health care FSA contribution
Effective 2010 2010 2011 2013
Cost impact 10% tax Impact will vary by individual 20% penalty (increased from 10%) $2,500 limit per employed person; indexed to inflation after 2013

 

  Medicare Payroll Tax Medicare Tax on Investment Income Income Tax Deduction for Medical Expenses Individual Mandate
Overview Additional Medicare tax for individuals with compensation over $200,000 or joint filers over $250,000 Medicare tax on investment income for Adjusted Gross Income (AGI) over $200,000/ individual or $250,000/joint filers Raises the amount of medical expenses required to be eligible for a tax deduction Requires individuals to obtain “minimum essential coverage” or pay a penalty
Effective 2013 2013 < age 65 – 2013
Age 65+ – see below		 2014
Cost impact 0.9% tax 3.8% tax
  • For those under age 65, 10% of AGI
  • Remains 7.5% for age 65+, plus spouses, through 2016
 2014: Greater of $95 per adult and $47.50 per child ($285 family maximum) or 1% of income over tax-filing threshold

2015: Greater of $325 per adult and $162.50 per child ($975 maximum per family) or 2% over threshold

2016: Greater of $695 per adult and $347.50 per child ($2,085 maximum per family) or 2.5% over threshold