Filed Under:Markets, Employee Benefits

Milliman: PPACA fee may raise premiums 2 percent

The new Patient Protection and Affordable Care Act (PPACA) health insurance fee could add about 1.7 percent to the cost of commercial coverage from a for-profit plan in 2014.

For coverage from a nonprofit plan, the fee could increase the cost an average of about 1.5 percent.

Mathieu Doucet and Julia Yahnke, actuaries at Milliman, have included those projections in analysis of the effects of the fee on the U.S. health insurance industry.

The drafters of PPACA included the industry fee in an effort to cover part of the cost of PPACA coverage expansion provisions.

The drafters also included the fee to compensate for what some thought might be dramatic increases in health insurance company revenue and profit totals as a result of PPACA "shared responsibility" provisions that will tax many individuals who fail to have what PPACA defines as being a responsible amount of health coverage.

The PPACA provision requires insurers -- including nonprofit insurers, privately managed Medicaid plans and private Medicare plans, but not self-insured employer plans -- to pay a total of $8 billion in PPACA fees in 2014.

The industry total is supposed to rise to $14.3 billion by 2018, then increase at a rate tied to the rate of premium growth, the actuaries said.

The impact will be greater on for-profit insurers than on nonprofit insurers, because a carrier cannot deduct the cost of the fee from its taxable income, the actuaries said. 

"The application of the tax will encourage larger employers to consider self-insurance over fully insured products," the actuaries said. 

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Nichole Morford

Nichole Morford
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