The Internal Revenue Service has issued proposed regulations on the annual fee that health insurance companies must pay under the Affordable Care Act (ACA). To fund certain health care reform initiatives, the ACA requires health insurers to pay an aggregate fee of $8 billion in 2014 and larger amounts in subsequent years.

The burden is to be allocated among insurers based on the premiums they collect for their U.S. health insurance risks. The government will calculate the amount each insurer must pay based on reports the insurers file by May 1 of each year. Payment will be due no later than September 30 of each year, beginning in 2014.

The regulations detail various exceptions to the new fee requirements. Exceptions apply based on:

  • The type of insurance. Accident, disability, long-term care, group specified disease, and Medicare supplemental insurance will be exempt from the fee, but the fee will apply to certain benefits that are often excepted from ACA requirements, such as dental, vision, and retiree health insurance.
  • The type of entity providing the insurance. For example, governmental entities and certain nonprofit corporations that are largely funded by government programs targeting low-income, elderly, or disabled populations are exempt from the fee. Self-funded plans are generally exempt, but most multiple employer welfare arrangements (MEWAs) will need to pay the fee to the extent they are self-funded.
  • The amount of premiums. The first $25 million in premium and half of the premium between $25 and $50 million will not be taken into account in determining the fee.

Sponsors of insured health plans may see increases in their premiums that result from these fees. Some insurers have already announced that they will pass the fees (along with fees for the Patient Centered Outcomes Research Institute and Transitional Reinsurance Program fees) on to their customers.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the annual fee for insurers or any other aspects of the ACA, contact Edward I. Leeds at 215.864.8419 or

Copyright © 2013 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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