California health insurers that want to get a jump on paying their new federal health insurance premium “fees” in 2014 must do so without including the 2014 fee costs in 2013 premium rates.
Adam Cole, general counsel for the California Department of Insurance, gives that interpretation in a letter ruling issued to a health insurer that was not identified.
The insurer asked the California department’s health actuarial office whether health insurers can take the cost of the new Patient Protection and Affordable Care Act of 2010 (PPACA) premium fee system into account when setting 2013 rates.
The PPACA premium fee, created by PPACA Section 9010, is set to cost health insurers $8 billion in 2014 and more than $100 billion over the next 10 years, according to America’s Health Insurance Plans (AHIP).
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PPACA also requires health insurers to pay a “transitional reinsurance fee” to help cover the cost of running a 3-year reinsurance program that is supposed to protect insurers against swings in claims risk that take place as a result of PPACA, Cole wrote in a discussion of his ruling.
A California insurer cannot use 2013 rates to pay the 2014 PPACA fees, because making customers fund the 2014 fees in 2013 “forces them to pay a charge that bears no relationship to the insurance they are being sold,” Cole wrote. “Such an assessment would be impermissible.”
Even the amount of fees a California health insurer will have to pay in 2014 is unknown at this time, Cole said.