For weeks, the excise tax on medical devices has been discussed as a provision of the Affordable Care Act that might be delayed or repealed as part of a deal to reopen the government and raise the debt ceiling.
But according to Politico, Senate Republicans and Democrats are discussing a one-year delay of a different tax as part of a deal: The Transitional Reinsurance Fee.
You might ask: What is the Transitional Reinsurance Fee?
Here’s what you need to know about it:
- It’s a temporary fee that is supposed to be imposed on most private health insurance plans for three years, from 2014 to 2016.
- In 2014, the fee would be $US63 per insured person, a cost that will likely be passed on as higher insurance premiums.
- The fee has a specific purpose: It supports reinsurance funds that will compensate insurers that sell health plans to people who are disproportionately sick. This is important. The individual insurance market is about to change a lot, with more than twice as many participants as it used to have and lots of new rules. Insurers don’t know what sort of people are going to buy plans in this new environment; if they’re afraid the new plan buyers will be especially sick, they may raise premiums to prepare for that. The existence of the fee and the funds it supports makes them more willing to offer low premiums in the Obamacare exchanges.
- The Department of Health and Human Services estimated that the reinsurance payments supported by the fee will reduce individual market health insurance premiums by 10 to 15% in 2014, more than offsetting the cost of the $US63 fee itself.
- This is one of the Obamacare provisions that unions have been railing against, because it will raise the cost of group health insurance (which most union members have) in order to reduce the cost of individually-purchased health insurance.
- The key question is: If the fee is delayed, where will the federal government come up with the money to make risk adjustment payments to insurers that cover especially sick people? Business Insider put that question to senior Republican Senate aide who declined comment. A senior Democratic aide didn’t immediately respond to a request for comment.
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