The Affordable Care Act (ACA) creates a transitional reinsurance program to help stabilize premiums in the individual market for the first three years of Exchange operation (2014-2016) when individuals with higher-cost medical needs gain insurance coverage. The program imposes a fee on health insurance issuers and self-funded group health plans.
On Oct. 24, 2013, the Department of Health and Human Services (HHS) released an advance copy of a final rule under the ACA. In the final rule’s preamble, HHS states that it intends to issue a proposed rule that would make the following changes to the reinsurance program:
- Exempt certain self-insured, self-administered plans from the reinsurance fees for 2015 and 2016; and
- Modify the collection deadlines for the fees to reduce the upfront burden to plans and issuers.
Contributions to the reinsurance program are required for health plans (fully insured and self-insured) that provide major medical coverage. Certain types of plans are exempt from the requirement to pay reinsurance fees, such as health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) that are integrated with major medical coverage, health savings accounts (HSAs) and coverage that consists solely of excepted benefits under HIPAA (for example, limited-scope dental and vision plans).
For insured health plans, the issuer of the health insurance policy is required to pay the reinsurance fees. For self-insured health plans, the plan sponsor is liable for paying the reinsurance fees, although a third-party administrator (TPA) or administrative-services only (ASO) contractor may be used to make the fee payment at the plan’s direction.
The reinsurance program’s fees are based on a national contribution rate. The reinsurance fee mainly consists of amounts collected to cover reinsurance payments and administrative costs, but it also includes funds that must be deposited into the general fund of the U.S. Treasury.
For 2014, the national contribution rate is $5.25 per month ($63 per year). The national contribution rates for 2015 and 2016 have not been established yet. The reinsurance fee is calculated by multiplying the number of covered lives (employees and their dependents) during the benefit year for all of the entity’s plans and coverage that must pay contributions, by the national contribution rate for the benefit year.
HHS has indicated that issuers and plan sponsors will be required to submit an annual enrollment count to HHS no later than Nov. 15 of 2014, 2015 and 2016 based on enrollment data from the first nine months of the year. Within 30 days of this submission or by Dec. 15, whichever is later, HHS will notify each issuer or plan sponsor of the amount of its required reinsurance contribution. The issuer or plan sponsor would be required to remit this amount to HHS within 30 days after the date of HHS’ notification.
In the preamble to the final rule, HHS states that it intends to propose in future rulemaking to exempt certain self-insured, self-administered plans from the requirement to make reinsurance contributions for the 2015 and 2016 benefit years. At this point, it is not clear which self-insured plans will be covered by the proposed exemption. However, it appears that self-insured plans will be required to pay the reinsurance fees for the 2014 benefit year.
HHS also intends to issue a proposed rule that would change the collection method for the reinsurance fees. Under the revised collection method, the fees would be collected in two installments to reduce the upfront burden to plans and issuers. The fee for reinsurance payments and administrative expenses would be collected at the beginning of the year and the fee for payments to the U.S. Treasury would be collected at the end of the year. Under this payment schedule, a larger payment would be due in January 2015 and a smaller one would be due in December 2015 for the 2014 reinsurance fee.
These changes will not become effective until HHS issues additional guidance.
Contact your Business Benefits Group representative for more information on the ACA’s reinsurance fees.