Huh? Spending $100 to Pay $3 Obamacare Fee

Jul 26, 2013

Obamacare adds to the amount of paperwork employers have to deal with. Photograph: luxomedia on Flickr. Licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Generic license.

Eli Lehrer runs the R Street Institute. It’s a Washington, DC think tank and also a small employer. He writes about a little-known requirement in the Patient Protection and Affordable Care Act (PPACA) that defies common sense, and that other small firms will deal with:

Among the provisions that thousands (perhaps tens of thousands) of small businesses are soon going to have to comply with is one that requires filling out a hugely complex form and paying an accountant to review and file it. In the case of the R Street Institute, we will be paying our accountant $53 to file this form. That may not sound like much but, aye, here's the rub:

Our fee came to just $3.

You read that right. We will be spending, when you figure in staff time, at least $100 to comply with a bureaucratic mandate, just so the government can collect a $3 fee.

According to Bloomberg BNA’s Nadia Masri, the "Patient-Centered Outcomes Trust Fund Fee" applies “to accident and health coverage, retiree coverage, and COBRA coverage” to fund evidence-based medicine research. Because R Street offers its employees a Health Reimbursement Arrangement (HRA) to help pay for health care it must pay the fee. This year, $1 is charged on applicable health plans. 

Jason Dinisen, R Street’s accountant, listed the actions taken and the time spent to fill out the seven-page Form 720 needed to pay the fee:

  • Initial phone call to the client to discuss the fee: 5 minutes
  • E-mails and phone calls to the client to verify that the insurance company and not client owes the fee on the health insurance policy the client offers (the client owes the fee on the HRA, the insurance company owes on the health insurance): 7 minutes
  • Reviewing the 21-page instructions to Form 720 to verify that we are supposed to call the Form 720 a “second quarter” filing even though the PCOT fee is based on a 12/31/12 year-end: 3 minutes
  • Preparing Form 720: 6 minutes
  • Reviewing Form 720, including another check of the instructions to verify that the non-applicable schedules on Pages 3-6 of the form need to be sent even if they don’t apply: 4 minutes
  • Fixing a typo I made on the client’s address on the form: 1 minute
  • Printing Form 720: 2 minutes
  • E-mail to the client asking them to please review Form 720 and explaining to the client that they should not be intimidated by the sheer volume of lines and weird codes on Form 720, that I just need them to verify their name and EIN: 4 minutes

Each of these steps were only a few minutes each, but it added up to $53 of the Dinisen's time and $100 total including R Street's. All this to send a $3 check to the IRS. It will be even more ridiculous for one-person companies who buy health insurance for themselves. Dinisen wrote, “Some sole proprietorships with an HRA will be going through this exercise so they can pay a $1 fee.”

Unlike the employer mandate, this fee wasn't delayed. If you haven’t already, start filling out the paperwork. The first deadline for the fee is July 31.

The PPACA is filled with requirements big and small like this one that force businesses to direct valuable time and money towards filling out paperwork and completing other compliance-related tasks than investing in their businesses.

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