Aug 30, 2010

PPACA Health Care Reform: Financial Implications for Dental Plans

Posted by: Neal
While Dental and Vision plans are not the focus of the new Patient Protection and Affordable Care Act (PPACA), there are several factors that impact Dental and Vision plans none-the-less. Recently, the National Association of Dental Plans (NADP) highlighted those that may affect dental plan premiums over the next few years.

Health Insurer Annual Fee
All health plans (carriers), including stand-alone dental and vision plans, are subject to the Annual Fee which begins in 2014. The amount of tax revenue raised by the annual fee beginning in 2014 is $8 billion and increases annually to $14.3 billion by 2018; by 2019 the fee will be based on rate of growth of premium. With the exception of some carve-outs for smaller plans and tax-exempt non-profits, plans are likely to share in the tax in proportion to the size of their fully insured premium. The fee paid by insurers in 2014 will be a function of premiums in-force in 2013. It is expected that the ultimate fee paid by carriers may be in excess of 2% of premium.

Cadillac Tax
The much talked-about "Cadillac Tax" is an excise tax for high-cost health plans. Beginning in 2018, insurers that offer employer-sponsored health coverage with aggregate value exceeding $10,200 (employee only) or $27,500 (family) will be charged a 40% excise tax on any amount above the threshold. In the final modifications to PPACA, it was clarified that stand-alone dental and vision plans are excluded from the aggregate value calculation. However, health plans that embed dental and vision as part of the core medical plan are required to consider the entire value of the embedded benefits in the excise tax test.

Other Indirect Costs to Consumers
Finally, changes to Flexible Spending Accounts (FSAs) could have an impact on consumers' wallets. While eligible out-of-pocket dental expenses can still be reimbursed via an employee's FSA account, the breadth of these accounts will be restricted. Employee contributions to FSAs will be limited to $2,500 per year beginning in 2013, and then adjusted for inflation.

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