July 29, 2014
Final Rule on the Affordable Care Act’s Transitional Reinsurance Program Fees
Under the three-year transitional reinsurance program1 created by the Affordable Care Act,2 health insurers and sponsors of self-insured group health plans must pay fees for 2014, 2015 and 2016. The per-person per year fee on each “covered life,” which includes dependents, is $63 for 2014. Transitional reinsurance fees3 are payable by plans that provide “major medical coverage,” which means health coverage for a broad range of services and treatments provided in various settings that provides minimum value.4
This Capital Checkup summarizes the following guidance:
- The payment method and frequency,
- The requirement that self-insured plans must pay the fee in 2014,
- The fee for 2015,
- When a plan is considered self-insured and self-administered and, therefore, is not subject to the fee for 2015 and 2016, and
- Two scenarios when plans are not required to pay fees for individuals.
The Capital Checkup concludes with a discussion of the implications for sponsors of self-insured plans.
The Centers for Medicare & Medicaid Services (CMS) announced on May 22, 2014 that the process for contributing entities (i.e., health insurers and self-insured insured group health plans) to submit enrollment counts and pay the reinsurance fees will be handled completely online, using www.pay.gov.5 CMS has recently begun a series of webinars to describe the payment process. A presentation from the June 30, 2014 webinar is available online. Additional webinars will be scheduled in the coming months. CMS announced on July 14, 2014, that the online forms for reporting the enrollment counts and for remitting the fees will be released July 28, 2014, and additional webinars will take place on that date.
Plan sponsors must submit their enrollment count (covering the first nine months of the calendar year) to the Department of Health and Human Services (HHS) via www.pay.gov by November 15 of 2014, 2015 and 2016. The amount due will be auto-calculated when the enrollment count is submitted. The submitter then schedules the payment date and the funds will be taken from the designated bank account on that date. The fee is paid based on this schedule regardless of whether the plan is a calendar-year plan or a non-calendar-year plan.
Each year’s contribution will be paid in two installments. The bulk of the fee will be paid in January (of 2015, 2016 and 2017) for the prior plan year. The balance will be paid during the fourth quarter of those years. The table below illustrates this breakdown.
|Division of Transitional Reinsurance Fee Payments
for 2014 and 2015*
|Fee Per “Covered Life”|
|Amount Paid |
in January of Payment Year
|Amount Paid in the Fourth Quarter of Payment Year||Total**|
On July 17, 2014, CMS posted guidance entitled, “The Transitional Reinsurance Program Operational Guidance: Counting Method Examples for Contributing Entities,” which discusses various methodologies for counting covered lives.
For 2014, all self-insured plans that provide major medical coverage are required to pay the transitional reinsurance fee. Plan sponsors that provide a self-insured plan that is not major medical coverage (e.g., a separate self-insured prescription drug plan or health reimbursement arrangement) would not pay the fee. However, if an insured major medical plan is also provided, the insurer would pay the fee for that plan.
The total amount of the annual reinsurance fee for 2015 will be $44.00 per person, including dependents. (The per-person fee for 2016 will be announced in 2015.)
For 2015 and 2016, self-insured, self-administered group health plans are not required to pay the transitional reinsurance fee. However, the final rule has a narrow definition of self-insured and self-administered. To be regarded as self-administered during the 2015 and 2016 benefit years in order to be exempt from paying the fee, self-insured plans must retain responsibility for claims processing, claims adjudication (including internal appeals) and enrollment.
Additional exceptions permit a self-insured group health plan to use a third party administrator in the following limited circumstances, but still avoid paying the reinsurance fee:
- It uses a TPA only for pharmacy benefits or for certain ancillary benefits (e.g., limited-scope dental/vision).
- It uses a TPA for a de minimis amount of services (up to 5 percent).
- It uses a TPA to obtain or lease a provider network, and obtain provider network development, claims re-pricing, and similar services.
A self-insured group health plan that is responsible for making reinsurance contributions can elect to use a TPA or administrative services-only contractor to transfer the fee from the contributing entity to HHS. However, plan sponsors that are self-administered should consult with legal counsel as to whether using a TPA or contractor to submit forms and transfer the fee affects the plan’s status as self-administered for the 2015 and 2016 submissions.
The final rule clarifies that group health plans do not have to pay the fee for certain individuals who have dual coverage where another plan is already paying the fee, including:
- Individuals who are enrolled in individual market health insurance coverage, and
- Individuals whose group health coverage is supplemental or secondary to other group health coverage, such as an employee’s spouse, whose coverage is secondary to that of the plan covering the spouse as an employee.
Plan sponsors that wish to take advantage of the exemption for secondary or supplemental coverage will likely need to develop a mechanism to get the appropriate representation from the individual’s primary coverage that the primary plan is responsible for paying the fee.
The final rule does not address whether a self-insured multiemployer plan that has a shared-services agreement with a network administrator would be exempt from paying the transitional reinsurance fee in 2015 and 2016. In the absence of explicit guidance, trustees of plans that have a shared-services agreement should rely on the advice of their fund counsel about whether to pay the fee.
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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with plan sponsors and their attorneys on compliance issues.
- The program will reimburse losses to insurance carriers who enroll individuals in the Exchanges who are higher-cost claimants due to their illnesses. (Return to the Capital Checkup.)
- The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
- The final rule was published in the March 11, 2014 Federal Register. (Return to the Capital Checkup.)
- For purposes of the reinsurance fees, major medical coverage means health coverage for a broad range of services and treatments provided in various settings that provides minimum value. This means that generally the fees would not apply to the following types of coverage: benefits that qualify as “excepted benefits” under the Health Insurance Portability and Accountability Act (HIPAA); plans that only provide prescription drug benefits; a Health Reimbursement Arrangement (HRA) that is integrated with a self-insured group health plan or health insurance coverage; a health savings account (HSA); a health flexible spending arrangement (FSA); or an employee assistance plan (EAP), disease management program or wellness program that does not provide major medical coverage. In addition, the fee is not paid with respect to retirees for whom Medicare pays primary, as Medicare (and not the group plan) is considered the individual’s major medical coverage. (Return to the Capital Checkup.)
- The announcement is on the CMS website. (Return to the Capital Checkup.)
Capital Checkup is Sibson Consulting’s periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only and should not be construed as legal advice. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.