WASHINGTON — Your medical plan is facing an unexpected expense, so you probably are, too.
It’s a $63-a-person fee to cushion the cost of covering people with pre-existing conditions under President Obama's health-care overhaul.
The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to employees.
Chantel Sheaks, an employee-benefits lawyer, calls it a “sleeper issue” with significant consequences, particularly for large employers. “Especially at a time when we are facing economic uncertainty, [companies will] be hit with a multimillion-dollar assessment without getting anything back for it,” said Ms. Sheaks, a principal at Buck Consultants, a Xerox subsidiary.
Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the fee.
The Obama Administration says it is temporary, levied for three years starting in 2014, to raise $25 billion. It starts at $63 and declines.
Most of the money will go into a fund administered by the Health and Human Services Department. It will be used to cushion health insurance companies from the initial hard-to-predict costs of covering uninsured people with medical problems.
Under the law, insurers cannot turn away the sick as of Jan. 1, 2014.
The program “is intended to help millions of Americans purchase affordable health insurance, reduce unreimbursed usage of hospital and other medical facilities by the uninsured and thereby lower medical expenses and premiums for all,” the Obama Administration says in the regulation.
An accompanying fact sheet issued Nov. 30 referred to “contributions” without detailing the total cost and scope. Of the total pot, $5 billion will go directly to the U.S. Treasury, apparently to offset the cost of shoring up employer-sponsored coverage for early retirees.
The $25 billion fee is part of a bigger package of taxes and fees to finance President Obama’s expansion of coverage to the uninsured.
It comes to about $700 billion over 10 years, and includes higher Medicare taxes effective Jan. 1 on individuals making more than $200,000 a year or couples making more than $250,000. People above those threshold amounts also face an additional 3.8 percent tax on their investment income.
But the insurance fee had been overlooked as employers focused on other costs in the law, including fines for medium and large firms that don’t provide coverage.