Budget Impacts of Health Care Reform, Federal Health Care Reform

Cities will have additional expenditures in 2014 due to federal health care reform.
(Published Jul 8, 2013)

As you prepare your budgets, don’t forget that, as employers, cities are going to have additional expenditures in 2014 due to federal health care reform regulations.

If you are a self-insured group, you are required to pay the following two fees:

  • Comparative Effectiveness Fee (PCORI): This fee funds research on the clinical effectiveness of medical treatments. The fee is effective in 2012 with the first payment due July 31, 2013. The initial cost is $1 per average number of covered lives for plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2013. The fee increases to $2 for the subsequent plan year and is indexed thereafter. Employers must file this fee using IRS form 720.
  • Transitional Reinsurance Program fee: This fee funds a program to offset the high-cost individuals moving into insurance plans and is effective for plan years January 2014-2016. The proposed fee for this program is currently estimated at $5.25 per covered life per month for 2014. The estimated fee for this program is $3.62 in 2015 and $1.79 in 2016. Additional guidance regarding the Transitional Reinsurance fee should be available in the near future.

Fully insured groups have the above two fees as well as two additional:

  • ACA Premium Tax (insurer fee): This is a tax on premiums to help support exchanges via premium subsidies and tax credits. It is estimated at 1 percent to 2 percent of premium in 2014 and will be itemized on renewals. This is a tax on the insurer. However, it is anticipated that it will be passed on to employers and calculated as a separate line item within the renewal calculation.
  • Minnesota Exchange Fee (small group only): This fee will be used to fund MNsure, the Minnesota exchange. Details of this fee have not yet been finalized, but is likely to be up to 3.5 percent.

The League has partnered with Gallagher Benefit Services to provide assistance to cities in complying with Health Care Reform regulations.

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