Five New ACA Taxes & Fees

One of the biggest questions asked about health reform is “ how are we going ot pay for all this?” Unfortunately, the answer is taxes.

Under the Affordable Care Act, five new taxes and fees will be added to the purchase of health insurance. The rules, timing and amounts for each of these vary so we’re providing a summary table with explanation for your convenience.

First, let’s run down the purpose of each of the taxes and fees:

  • Annual fee on health insurance carriers – This annual fee will be assessed on all fully funded health plans based on premium. (Note: Final regulations have not been released on this fee.)
  • Transitional Reinsurance Program – Fees collected from all commercial plans (fully and self funded) sold both on and off the exchange and in both the group and the individual markets. This will be used to pay for high-cost claimants insured in the individual market though out the country. The program is temporary and runs from 2014 through 2016.
  • Risk Adjustment Admin fee  – A fee used to develop a risk adjustment methodology that will compensate certain plans with membership that is less healthy than average by assessing plans with membership that is healthier than average. This fee is assessed on all individual and small group policies.
  • PatientCentered Outcomes Research Institute (PCORI) fee – This fee will fund the PCORI, which will conduct comparative effectiveness research. The fee will also be assessed on all fully-insured and self-funded plans including health reimbursement arrangements. The fee will be from 2012 through 2019. Self-funded employer groups are responsible for applying this assessment and filing and annual excise tax retrun (Form 720) with the IRS.
  • Exchange user fee – Fee that will be applied to all plans purchased from the exchange both individual and Small Business Health Options Program (SHOP).


Finally, let’s review what these fees would look like againse 2013 average premiums.

  Self-Funded Small Group Large Group Individual Medicare Advantage Medicaid Medigap
Annual fee on health insurance carriers* N/A 2.5%-4.0% of premium (PPO)0.75%-1.5% of premium (HMO/POS) N/A 0.75%-1.5% of premium
Transitional Reinsurance Programs $5.25 PMPM beginning in 2014. However, the fee is subject to change if not enough is collected nationally. N/A
Risk Adjustment Admin Fee** N/A $1 PMPY N/A $1 PMPY N/A
Patient-Centered Outcomes Research Institute Fee 2014:  $1 PMPY2015:  $2 PMPY

2015-2019: $2 PMPY + medical inflation

Exchange User Fee N/A 3.5% of premium N/A 3.5% of premium N/A
Projected total cost based on 2013 premiums (reflected as PMPM) $8-10 $22-27 PPO$9-13 HMO $19-24 PPO$11-15 HMO $12-17 PPO$5-13 HMO $6-7 $1-3 $2-5
If purchased on the exchange +3.5% +3.5%  


PMPM = Per member per month

PMPY = Per member per year

*Final regulations are pending. Information noted is based on preliminary rules.

**Does not apply to grandfathered plans.

^Projected PMPM costs are based on fees assessed in 2014. These amounts are expected to increase.

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