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Fees and Taxes

Insurers and employers pay several fees and taxes to help fund the ACA.

Fees and taxes overview

Comparative Effectiveness Research Fee (CERF)

The ACA established the Patient-Centered Outcomes Research Institute (PCORI) to fund and conduct research to compare the effectiveness of various medical services used to treat, manage, diagnose or prevent illness or injury. The work of PCORI is partially funded by this fee.

  • Annual fee applies to insured and self-funded medical plans from 2011 through 2019
  • Initial fee due July 31, 2013 was $1.00 per medical plan participant
  • Final fee due July 31, 2020 will be $2.45 per participant
  • Fee is due each year on July 31 and is paid using IRS Form 720

Get additional CERF details

See payment amounts and due dates

For more information, visit Cigna’s CERF Toolkit

Health Insurance Industry Fee

This fee on health insurers started at $8 billion in 2014 and continues to increase each year with premium growth. The fee, which applies only to insured business, is based on each insurer’s share of the taxable health insurance premium base (among all U.S. health insurers).

  • Fee applies to insured medical, dental and vision plans
  • Fee took effect in 2014 and was suspended for 2017 and 2019
  • Fee is built into premiums and adds 3% to 4% to costs

Learn more about the Health Insurance Industry Fee

Excise “Cadillac” tax

This 40% tax on high-cost employer medical plans was intended to reduce preferred treatment of employer-sponsored health plans and reduce excess health care spending.

This tax has been delayed from the original effective date of 2018 to 2022. No regulations have been issued to date, and there are many open issues about that need to be addressed before the tax takes effect.

  • 40% excise tax on high-cost employer medical plans
  • Original 2018 effective date delayed until 2022
  • $10,200 individual/$27,500 family (2018 amounts to be indexed)

Learn more about the Excise “Cadillac” Tax

Alliance to Fight the 40

Many employers, unions, insurers and health insurance industry groups would like to see this tax repealed or modified.

The Alliance is a group of stakeholders seeking to repeal the 40% Cadillac Tax.

Learn more

Reinsurance Fee

This annual fee on medical plans was collected from 2014 through 2016, and sunset after the final payments were made in 2017. The majority of the $25 billion collected was used to fund a reinsurance program intended to lessen the impact of adverse selection in the individual market.

The fee applied to both insured and self-funded medical plans. For an insured plan, the fee was paid by the health insurer. For a self-funded plan, the fee was the employer’s responsibility.

For questions about fees and taxes

The Cigna ASO PPACA Fees and Reporting Resources team is available to respond to questions from sales, brokers and clients.

This team can be reached by phone and email:

Learn more about the services this team provides

Fees and taxes in detail

Comparative Effectiveness Research Fee Details

What it is/fee duration Annual fee on insured and self-funded medical plans until 2019
Purpose Fund comparative effectiveness research
Amount
Who pays
  • Insured: Insurers; fee is built into premiums
  • Self-funded: Employers; insurers are not allowed to pay or calculate
How paid Tax is self-reported on Excise Tax Form 720
Tax implications Tax deductible
Estimated cost impact
  • $1 per member per year (PMPY) in first year
  • Increases annually
Types of coverage affected
  • Insured group medical plans, including minimum premium plans
  • Self-funded group medical plans
  • Individual/family plans
  • Stand-alone, insured, behavioral health plans
  • Limited medical plans (also known as voluntary plans)
  • Individuals on a temporary U.S. Visa who live in the U.S.
  • Medicare Surround and Medicare Expand policies
  • Retiree-only plans for post-65 retirees where Medicare is the primary payer
  • Health Reimbursement Accounts (HRAs)
  • Flexible Spending Accounts (FSAs) if the employer contribution is > $500 and more than the employee contribution
Coverage excluded
  • U.S.-issued expatriate plans
  • Exempt FSA plans
  • Medicare Parts A-D coverage
  • Medicaid coverage
  • Health Savings Accounts (HSAs)
  • Stand-alone dental and vision plans
  • Employee Assistance Plans (EAPs) that do not provide significant health insurance benefits

Information for fully insured employers

How the fee is paid The fee is built into insurance premiums
How the fee is determined
  • Cigna pays the fee using the “Snapshot Method” to determine average covered lives
  • Cigna will add the total lives covered on one or more dates in each quarter of the policy year and divide by the number of dates on which a count was made
    How HRAs/FSAs are treated
    • HRAs/FSAs are considered self-funded group health plans
    • Insurer pays one fee for the medical policy
    • Employer pays a separate fee for the HRA/FSA

    Cigna reporting for fully insured employers

    • At no additional cost, Cigna will provide information on HRA/FSA covered lives via self-service reporting, based on eligibility as of the 15th of each month
    • Employers will have the option of using this data or their own data for calculating the fee payable for HRAs/FSAs
    • Eligibility information is available on the Client Resource Portal (CRP) and on CignaAccess.com

    Information for self-funded employers

    How the fee is paid The employer is responsible for paying the fee
    How the fee is determined
    • Upon request, Cigna will provide reporting to help employers determine average covered lives,
    • Employers can also determine using their own records
      How HRAs/FSAs are treated
      • If the medical plan and the HRA or FSA have the same plan year, the employer pays one fee
      • If they have different plan years, an annual fee is due on each

      Cigna reporting for self-funded employers

      • At no additional cost, Cigna will provide information on covered lives via self-service reporting, based on eligibility data as of the 15th of each month
      • Employers will be able to access a report for: Medical, Pharmacy, Behavioral, FSAs, HRAs and Medicare Surround and Medicare Expand
      • Available on the Client Resource Portal (CRP) and on CignaAccess.com
      • Employers will be able to request reports for self-funded, stand-alone Cigna Behavioral Health and Cigna Global Health Benefits® plans

      Health Insurance Industry Fee Details

      What it is/fee duration
      • Permanent, annual fee on health insurers (including HMOs)
      • Began in 2014 (suspended in 2017 and 2019)
      Purpose Help fund federal and state Marketplaces/Exchanges
      Amount
      • $8 billion in 2014
      • Increases each year to $14.3 billion in 2018
      • Increases with premium growth after 2018
      • Allocated to insurers based on prior year’s share of total health insurance premium
        Who pays Insurers
        Tax implications Tax deductible for employers as part of premium
        Estimated cost impact
        • 2%-2.5% of premium in 2014
        • Increasing to 3%-4% of premium in future years, when in effect
        Types of coverage affected
        • Insured individual and group medical plans
        • Stand-alone insured dental, vision, behavioral health and pharmacy plans
        • Medicare Advantage plans
        • Retiree-only plans
        • Part D prescription benefit plans
        • Medicaid (and CHIP) programs
        • Taft-Hartley plans, to the extent the plans meet the other criteria for inclusion
        Coverage excluded
        • Self-funded employer-sponsored group medical plans*
        • Nonprofit corporations that receive more than 80% of their revenue from government-sponsored poverty programs (Medicaid, CHIP) and comply with certain restrictions on political activity
        • Medicare supplemental coverage that meets the requirements of section 1882(g)(1)
        • VEBAs established by a union or collective bargaining agreement
        • Coverage for specific diseases or hospital indemnity coverage
        • Accident only coverage
        • ASO/Stop-loss
        • Employee Assistance Plans (EAPs), disease management programs and wellness programs that do not provide significant health insurance benefits
        • U.S.-issued expatriate plans after 2015

        *Some benefits may be covered under an insured plan and therefore subject to this fee.