Last month, HHS released final regulations regarding the transitional reinsurance program that the Affordable Care Act requires each state to establish beginning in 2014. The purpose of the transitional reinsurance program is to help stabilize premiums in the individual market during the first three years that the state-based Exchanges are in effect (2014 – 2016).
The Affordable Care Act requires all health insurance issuers and third-party administrators on behalf of self-insured group health plans to make contributions to the program, which will provide reinsurance payments to health insurance issuers that cover high-risk individuals in the individual market. As set by statute, the total contributions to be collected by all states must equal $10 billion in 2014, $6 billion in 2015, and $4 billion in 2016. On a national basis, an additional $2 billion in 2014, $2 billion in 2015, and $1 billion in 2016 will be collected for the U.S. Treasury.
As clarified in the final regulations, HHS will set a national contribution rate each calendar year in an annual notice of benefit and payment parameters. The amount that each contributing entity must pay will be determined based on all covered enrollees of that entity. If a state does not establish a reinsurance program, HHS will collect contributions for entities in that state. In all cases, HHS will collect reinsurance contributions from self-insured plans and third-party administrators on their behalf. The first reinsurance contributions will be collected beginning January 15, 2014 on a quarterly basis. Plans that only cover HIPAA-excepted benefits are exempt from the reinsurance contributions.
For employer sponsors of self-insured plans, these rules could mean increased costs in two forms. First, while it appears that third-party administrators on behalf of self-insured group health plans will be responsible for paying the required contributions, the third-party administrators could pass these costs on to plan sponsors in the form of higher fees. Second, it appears that self-insured group health plans that are self-administered (i.e., do not have a third-party administrator) would be responsible for remitting the reinsurance contributions. The exact amount of these costs will not be known until the contribution levels are set by HHS.