Benefits Group Asks for Exemption of Retiree Health Plans From Health Reform Law Fee

By Jerry Geisel

Jul. 25, 2012

A benefits trade group is asking the Internal Revenue Service to exempt retiree health care plans from a fee that will be imposed on health care plans offered by insurers and self-funded employers.

That fee—mandated by the health care reform law to fund research on medical outcomes—will be $1 per plan participant for the first plan year ending after Sept. 30, 2012, and $2 per participant in succeeding years.

For plan years starting after Sept. 30, 2014, the fee will be indexed to reflect the percentage increase in national medical expenditures as published by the Department of Health and Human Services.

While the fee clearly applies to retiree health care plans, the American Benefits Council is asking the IRS for at least an exemption.

Subjecting retiree health care plans to the fee “may lead employers to cease offering this very valuable benefit, particularly since such coverage would likely become more expensive by virtue of the application of” the fee, ABC said in a letter sent to the IRS last week.

In addition, ABC asked the IRS to clarify whether the fee applies to individuals who are receiving COBRA health care continuation coverage. ABC doesn’t think it should apply.

“COBRA coverage is arguably not established or maintained by an employer for the benefit of employees, given that it is mandated by federal law,” ABC said.

Because COBRA coverage is a federally mandated benefit, it would seem inappropriate to impose the health care reform law fee on the coverage, ABC said.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email

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Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management.

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