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New Taxes Under the ACA



New Taxes Paid Directly by all Self-Funded and Fully-Insured Plans

Patient Center Outcome Research Institute (PCORI)

The purpose of these fees is to fund the PCORI, which assists patients, clinicians, purchasers, and policy makers in making informed health decisions by advancing quality and relevance of evidence based medicine through synthesis and dissemination of comparative clinical effectiveness research findings. The fees began in October 2012 at $1 per member per year and rise to $2 per member per year in 2013 for the duration of the tax, and then phase out in 2019. The Fee is paid by employers, if self-funded, and the health insurer if fully-insured.

Transitional Reinsurance

These fees are collected to fund the risk adjustment, reinsurance and risk corridors programs for health insurance exchanges. The purpose of the program is to create premium stabilization in the newly enrolled populations within the health insurance exchanges and to reimburse the Treasury for the Early Retiree Reimbursement Program (ERRP). The fees for the Transitional Reinsurance and ERRP apply for three years, then phases out by legislation. The fee for 2014 is $63 per covered member, per year and is paid by employers, if self-funded and health insurer if fully insured.

New Taxes Paid indirectly by all Healthcare Consumers

Medical Device Tax

A new 2.3% tax on medical device manufacturers begins in 2013.

Pharmaceutical Manufacturers Tax

The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. The fee is $3 billion for years 2014 through2016, $4 billion for 2017, $4.1 billion for 2018, and $2.8 billion for 2019 and thereafter.

New Taxes on Fully-Insured Health Insurance, but not on Self-Funded Plans

Health Insurance Taxes (HIT)

HIT fees are paid by health insurance issues based on their market share for the previous year. The Treasury will collect $8 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017, and $14.3 billion in 2018. Under section 9010(e) (2), the applicable amount for 2019 and thereafter is the applicable amount for the preceding year, increased by the rate of premium growth.

This communication is designed to provide a summary of significant developments to our clients. Information presented is based on known provisions. Additional facts and information or future developments may affect the subjects addressed. It is intended to be informational and does not constitute legal advice regarding any specific situation. Plan sponsors should consult and rely on their attorneys for legal advice.