Individuals and their Families could pay Surcharge for State Exchanges

According to the HHS Proposed Regulations , the Federal Government is discussing charging a fee to insurance companies who offer products in the State Exchanges where the States have refused to participate. In other words, in the current 17 states that have declined or not signed on board to develop and run a State Exchange, Insurance Companies could be charged a 3.5% fee.

In addition to the Federal government, other states such as California, Oregon, Nevada and Connecticut are considering assessing between 2% to 4% in fees. The state of Massachusetts already charges a surcharge. The fee varies on the type of plan and appears to have had a minimal impact on participation in the various plans. But the devil may still be in the details as employers and individuals discover that more of the costs associated with the State Exchanges and other PPACA provisions will be passed on to them.

With the State Exchange surcharges, the end result is likely to be an increase in premiums for those employees and individuals who choose to participate in one of the affected State Exchanges. Of course, as an employer we can already anticipate the questions we might receive. The primary one of course is; what will that mean for me and my family?

If we look at the current average annual premium of $5,615 for single coverage and $15,745 for family coverage (based on the Employer Health Benefits 2012 Survey) adding 3.5% to the premium would mean an individual premium would be $484.29 (an increase of $16.38 per month) and the family premium would be $1,358.00 (an increase of $45.92 per month). Those in favor of the surcharge feel the increase will be insignificant, especially when individuals and their families may receive some type of subsidy to cover the cost of coverage.

However, this will depend on how much of a subsidy the individual may receive. Also, the impact on how insurance companies, that have to still meet MLR restrictions, is unclear. Will they be able to cover the additional cost and still maintain the same administrative services they now offer to individuals and employers? Only time will tell.

In the meantime, as the details are ironed out between the government and insurance carriers for the State Exchanges and other PPACA provisions, employers would be wise to keep their eye on the ball as it may end up in their court after all.

BCL Systems, Inc.

The source in Human Resources

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