Transitional reinsurance fund dismay

Earlier this month, the FEHBlog shook his head when he read the HHS press release promoting the 2014 benefits and parameters notice as stabilizing premiums in the health insurance exchanges. As the Wall Street Journal points out today  employers are recognizing to their dismay that this anticipated stabilization occurs on their backs via a $63 per covered individual payment to a transitional reinsurance fund.  

The fee comes on top of other costs employers expect to face.
Proponents of the law say it eventually will lower employers’ health
costs by expanding insurance coverage to 30 million Americans, meaning
employers won’t subsidize their unpaid medical bills.

Administrators for employee health plans
have warned federal regulators they could pare insurance benefits to
absorb the fee. Some benefits experts expect employers will at least
partially pass on the $63 to workers.

The balance will be passed on through higher consumer prices.  The article illustrates the fact that the law relies very much on cost-shifting rather than cost-reduction to cover the uninsured.

FEHB plans also will be hit with this fee next year. The article indicates that the fee is expected to add 1% to 2014 premiums.  The fee will decrease in 2015 and 2016, the last year for this three year program (unless Congress extends it). Congress expected that HHS will collect $25 billion over that period. HHS is using $20 billion for the reinsurance program in the exchanges and is refunding the balance to the U.S. Treasury to cover the cost of the ACA’s early retiree reinsurance fund. “A Boeing spokesman said the retiree program “was not advertised as a program prefunded by the government to be paid back at a later time,” according to the Journal. Boeing got $50 million out of the fund; FEHB plans got bumpkus due to an HHS rule.

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