Clearing Up Confusion Around The Health Insurance Provider Fee

One of the funding mechanisms for the health insurance exchanges is the implementation of the health insurer fee that will go into effect in 2014.  I’ve seen this referred to as a health insurance provider fee (a bit confusing as it might lead people to believe that the fee is imposed on medical providers rather than insurers), a health insurance industry fee, and an ACA health insurance carrier fee, among others.  But whatever you want to ACA  health insurance provider or carrier fee to fund exchangescall it, the fee is an amount that will be collected from health insurance carriers starting next year, and the funds will be used to help pay for the state and federal health insurance exchanges.

The fee will generate $8 billion in 2014, and will increase each year up to $14.3 billion in 2018.  After that, it will increase annually in line with health insurance premiums.  Insurance carriers will be responsible for remitting their share of the fee, which is calculated based on the insurer’s total collected premiums from the prior year.

As is generally the case with any new fees or mandates that increase costs for insurance companies, this fee will be passed on to companies and individuals who purchase policies.  However, it won’t necessarily be easy to determine how much the fee is impacting your health insurance premiums, since many carriers are expected to just roll the fee into their total premiums.

In Colorado, Rocky Mountain Health Plans has stated that they will be adding the health insurance provider fee as a separate line item on their bills in an effort to be as transparent as possible.  They will begin collecting the fee next month (July 2013) in order to spread the fee over a longer time horizon and thus lessen the impact on next year’s premiums.  Carriers can choose to wait to begin collecting the fee, but the total amount collected will be the same regardless:  Roughly 2% – 2.5% of total premiums in 2014, and 3% – 4% of total premiums in future years.  In the individual market, RMHP will be Rocky Mountain Health Plans HMO Coloradocollecting $4.12 per member per month, for the rest of 2013.  If you have a SOLO plan with RMHP and notice a line item on your bill labeled “Health Insurance Providers Fee”, now you’ll know what it is (be aware that the total collected is per member per month, so if you have a family of five on a RMHP policy, your bill will reflect a charge of $20.60/month starting in July).  If you have coverage with another carrier, you’ll still be paying the fee (some carriers had planned to start collecting it early this year), but you might not be aware of it because it’s just wrapped into your total premium.

As with the Comparative Effectiveness Research Fee (national, part of the ACA) and the CoverColorado Assessment (Colorado-only), this fee is not a revenue-generator for health insurance carriers, as the money is simply being collected by the insurers and then remitted to the government in order to provide funding for the exchanges.  It’s also not something that can be used to comparison-shop for health insurance coverage; since all carriers are required to pay the fee, they will all be collecting it from their insureds.  So if you’re with a carrier that opts to list the fee as a separate line item on your bill, rest assured that everyone else is paying it too, even if it’s not obviously stated on the bill.

Another fee – the Reinsurance Assessment – is coming in 2014 and will collect $25 billion over three years (2014 – 2016) to create a reinsurance fund to stabilize the individual health insurance market against an influx of high-risk insureds.  The impact of this fee is expected to be about $63 per member per year in 2014, with lowered impact the following two years.  As with the other fees, this will be applied across the majority of individual and group medical plans.  Some carriers might opt to list it as a distinct item on member bills, but most will likely just roll it into the overall premiums.   The fee will be collected from all members, regardless of whether your insurer opts to specifically list the amount on your bill.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

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