Fees, Taxes and Penalties

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You may notice the following new fees and taxes legislated by The Affordable Care Act (ACA):

Transitional Reinsurance Program –
All plans in Maryland, Virginia and DC will be charged a $27 per member per year fee.1

Patient-Centered Outcomes Research Institute Fee (PCORI) –
Commercial health insurers and employers sponsoring health plans will be assessed an annual fee to fund patient-centered outcomes research. This fee, which will be imposed for a limited number of years, is:

  • $2 times the average number of covered lives for plans ending on or after October 1, 2013 and before October 1, 2014; and
  • Indexed to medical inflation for plan and policy years beginning on or after October 1, 2014 and before October 1, 2019.2

The following fees will be applied, but the amounts have not been determined by the federal government:

Health Insurance Tax (HTT) –
All plans in Maryland, Virginia and DC will be charged this fee. CareFirst estimates the cost will fall between 2–3 percent of the premium and will be passed on to the account.3

1 United States Government Printing Office. Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014: A Rule by the Health and Human Services Department on 03/11/2013. CareFirst accessed this information on July 18, 2013.

2 Patient-Centered Outcomes Research Trust Fund Fee (IRC 4375, 4376 and 4377): Questions and Answers.

3 Internal Revenue Service. Health Insurance Providers Fee (RIN 1545-BL20). CareFirst accessed this information on July 18, 2013.

Transitional Reinsurance Program (begins 1/1/2014) –
For fully-insured? plans, this fee will be included in monthly billing statements and CareFirst will pay on behalf of the group. Employers with self-funded? plans should pay this fee directly to the Department of Health and Human Services.

Patient-Centered Outcomes Research Fund Fee (PCORI) –
For fully-insured plans, CareFirst must file Form 720 and pay the required PCORI fee directly to the IRS. For self-insured plans or Health Reimbursement Arrangements (HRAs), the employer must file Form 720 and pay the fee directly to the IRS. In these cases, Third Party Administrators cannot pay the fee on behalf of a plan. If the group has a fully-insured plan and an HRA, CareFirst will pay the fee for the fully-insured plan but the employer must pay the fee directly to the IRS for the HRA.

Health Insurer Premium Tax (begins 1/1/2014) –
Large groups will be assessed this tax based on net premiums? and CareFirst will pay on behalf of the group. Self-insured groups do not have to pay this tax.

Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent (FTE) employees will be required to offer affordable employer-sponsored health coverage or face paying a penalty. This provision will be implemented January 1, 2015.

Beginning on January 1, 2020, a tax will be levied on employers with health plans exceeding a high-cost coverage threshold. For single coverage, this threshold is $10,200 per year. For family coverage, it’s $27,500 per year. Employers will be required to pay an excise tax of 40 percent on costs that exceed the high-cost threshold.

The Internal Revenue Service (IRS) has issued proposed and/or final guidance to many of the ACA tax provisions that are currently in effect, or will take effect, in the next several years.

According to the IRS6:

  • The tax credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ fewer than 25 full-time equivalent employees with an average income of less than $50,000.
  • On January 1, 2014, the contribution rate increased to 50 percent of the employer’s contribution for small business employers and 35 percent of the employer’s contribution for small tax-exempt employers (such as charities).
  • The small business health care tax credit is only available if a small employer pays premiums on behalf of employees enrolled in a qualified health plan through the SHOP. To be eligible for the tax credit, employers must cover at least 50 percent of the cost of employee-only health care coverage for each of their employees.
  • An employer may only receive the small employer tax credit for two consecutive years.

6 What you Need to Know about the Small Business Health Care Tax Credit. CareFirst accessed this information on September 29, 2014.

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