Source: United Benefit Advisors, LLC
The Affordable Care Act established a Reinsurance Program to assist with stabilizing health insurance premiums payable for coverage in the individual market during 2014 through 2016. The Reinsurance Program requires health insurance issuers and sponsors of self-insured health plans to pay a Transitional Reinsurance Fee for 2014, 2015, and 2016. The fees collected under the program will be distributed to health insurance issuers in the individual market, which includes the health insurance exchanges established under the Affordable Care Act, to off-set the cost of coverage provided to highcost individuals in the individual market during 2014 through 2016. The payments to the issuers are intended to reduce the insurance risk associated with providing coverage in the individual market to potentially high-cost participants.
Calculation of Fee
The fee is calculated based on the number of covered lives under the health plan (including all employees, spouses and dependents covered under the plan). Regulations issued by the Department of
Health and Human Services (HHS) provide alternative methods that can be used for calculating the number of covered lives, depending on whether the plan is insured or self-insured. The fee for 2014
is $5.25 per covered life under the plan per month ($63.00 annually per covered life during 2014). The fee will decrease for 2015 and 2016.
The fee only applies to plans providing major medical coverage, including high deductible health plans, COBRA coverage, and retiree-only medical coverage. The fee is generally not applicable to
health reimbursement arrangements, health savings accounts, health care flexible spending accounts, employee assistance programs that do not provide significant medical coverage, stop-loss coverage, and plans providing solely prescription drug coverage.
Reporting and Payment Deadlines
The insurance issuers are required to pay the fee for fully insured plans, and plan sponsors are required to pay the fee if the plan is self-insured (but plan sponsors may enlist third-party administrators to assist with payment). The deadline for reporting to HHS the number of covered lives each year is generally November 15 of the applicable year, but HHS has announced that the 2014 deadline has been extended to December 5, 2014. Insurers and plan sponsors have two alternatives for paying the fee. They can either pay the fee in a single lump sum by January 15 of the following year (paying the full $63.00 per covered life for 2014), or they can pay it in two installments, with the first installment equal to the sum of $52.50 per covered life (for 2014) due by January 15, and the second installment equal to $10.50 per covered life (for 2014) due by the following November 15. The Department of Labor has indicated that the payment of the reinsurance fees can be treated as a plan expense under ERISA because the payment is required by the Affordable Care Act.
HHS recently released the form that insurers and sponsors of self-insured plans must use to register and report the number of persons enrolled in the health plan. The form can be accessed at
https://www.pay.gov/public/form/start/64510311. The reinsurance fee is also paid through www.pay.gov, which requires registration before submitting the form and making the payment.