Jackson Jambalaya

Insurance companies providing coverage in states that do not set up a health insurance exchange under Obamacare will pay a 3.5% surcharge on premiums.  The surcharge will fund the creation and maintenance of the federal exchanges for such states.

Several Republican governors announced they will not implement the exchanges.  Obamacare opponents argue the refusal to set up the exchanges will stop Obamacare dead in its tracks.  They claim the law did not provide a funding mechanism for the creation of federal exchanges.  If the states did not create exchanges, the Obama administration has no means of creating federal exchanges, thus blocking the implementation of Obamacare.  This proposed rule seeks to avoid that scenario as it provides a source of funding for the federal exchanges. The draft regulations state in Section III (F):

"If a State is not an electing State or does not have an approved Exchange, section 1321(c)(1) directs HHS to operate an Exchange within the State. In addition, 31 U.S.C. 9701 permits an agency to establish a charge for a service provided by the agency.(p.222 below)...

we are proposing that HHS collect a user fee from participating issuers (as defined in §156.50(a)) to support the operation of Federally-facilitated Exchanges. Participating issuers will receive two special benefits not available to the general public when they offer plans through a Federally-facilitated Exchange: (1) the certification of their plans as QHPs (Qualified health plans), and (2) the ability to sell health insurance coverage through a Federally facilitated Exchange to individuals determined eligible for enrollment in a QHP.(p.223)...

For the 2014 benefit year, we propose a monthly user fee rate equal to 3.5 percent of the monthly premium charged by the issuer for a particular policy under the plan. We seek to align this rate with rates charged by State-based Exchanges, and may adjust this rate to take into account comparable State-based Exchange rates in the final Payment Notice.(p.224)...."

Kaiser Health News reported fewer than 20 states have fully committed to implementing their own exchanges. The law does allow the states to charge user fees for their own exchanges. However, the Washington **** reported

"Health and Human Services will operate a health insurance exchange in all states that decline to set up the marketplace themselves. In order to finance the exchange’s operations, new draft regulations released Friday envision health plans paying a “user fee” if they want to sell in that space..." Article

Although the government will be charging this fee to "users", the end result will be a new charge to the consumer as the insurance companies will undoubtedly pass it on through higher premiums.