Starting in 2014, the new transitional reinsurance program will require self-insured group health plans and health insurance issuers to pay per-enrollee fees each year for three years. In March, the Department of Health and Human Services released final regulations that confirm a number of important details about the application and calculation of the transitional reinsurance program fees.
The reinsurance fees are intended to stabilize premiums in the individual market for the first three years that the Exchanges are in effect (2014-2016). The reinsurance fees will be used to make payments to health insurance issuers that cover high-risk individuals in the individual market. Following the proposed regulations that were released December 2012, the final regulations clarify and confirm the following points of interest to group health plans:
- Fee Amount. Consistent with the proposed regulations, the annual fee will be $63 per covered life for 2014. The fee may be paid from plan assets as a permissible plan expense under ERISA.
- Payment Responsibility. Self-insured groups health plans are ultimately responsible for reporting enrollment counts and making reinsurance contributions to HHS. However, self-insured plans may elect to use a third-party or administrative services only entity to perform these functions on behalf of the plan.
- Due Date. Plans must submit their enrollment counts to HHS by November 15 of each applicable year. (The first enrollment counts will be due November 15, 2014.) Within 30 days, HHS will notify the plan of its required contribution amount. Contributions must then be made within 30 days of the notification from HHS. HHS will provide details on the submission of enrollment counts and contributions in future guidance.
- Applicable Coverage. Contributions must be made for “major medical coverage.” Retiree coverage is subject to the reinsurance fee, unless the coverage is secondary to Medicare or only provides prescription drug benefits. COBRA coverage is also subject to the reinsurance fee to the extent that it constitutes major medical coverage. Flexible spending arrangements (FSAs), health savings account (HSAs), integrated health reimbursement arrangements (HRAs), and expatriate coverage are not subject to the reinsurance fee.
- Combining Plans. If a plan sponsor maintains at least two group health plans that collectively provide major medical coverage for the same covered lives simultaneously, those multiple plans must be treated as a single group health plan for calculating the reinsurance fee. A plan sponsor may treat multiple plans as separate group health plans if each separate group health plan is treated as offering major medical coverage.
- Counting Covered Lives. Self-insured group health plans may use one of four methods for calculating the number of covered lives under a plan: an “actual count” method, “snapshot count” method, “snapshot factor” method, or “Form 5500” method. Under the Form 5500 method, for example, plans look at the data from the Form 5500 for the last applicable plan year to determine the number of covered lives under the plan. If the plan offers only self-only coverage, the number of lives equals the sum of the total participants covered at the beginning and at the end of the year, divided by 2. If the plan offers self-only and other coverage, the number of lives equals the sum of the total participants covered at the beginning and at the end of the year (not divided by 2).
The Form 5500 method is also available for counting lives for purposes of the separate fee for the Patient-Centered Outcomes Research Trust Fund. Note that the December 2012 final rules for the Patient-Centered Outcomes Research Trust Fund indicated that a plan sponsor cannot use the Form 5500 counting method if the Form 5500 is not filed by the July 31 due date for paying the fee for the plan year (for example, if the plan takes an extension to file the Form 5500). There does not appear to be a similar restriction for using the Form 5500 counting method for purposes of the transitional reinsurance program fee.