What is the “temporary reinsurance fee”? The Affordable Care Act (“ACA”) requires the creation of a transitional reinsurance program for the first three years (2014-2016) of the state health insurance exchanges to help stabilize the exchange premiums. It is intended to shift the risk of covering certain catastrophic medical expenses from the primary insurer to a reinsurer. The funding for the transitional reinsurance program will be derived from a new, transitional reinsurance contribution (“Reinsurance Fee”).
Who pays the Reinsurance Fee? The Reinsurance Fee requires contributions to be made with respect to “major medical products”, but does not define the term. Guidance indicates that the Reinsurance Fee is imposed on (a) health insurance issuers and (b) self-insured group health plans. In the context of self-insured group health plans, HHS has already advised that the Reinsurance Fee is the responsibility of the plan, but a third party administrator may be utilized to remit the Reinsurance Fee on the plan’s behalf.
How much is the Reinsurance Fee? We still don’t know the national reinsurance contribution rates for any of the three applicable years. For the first year (2014), HHS had originally estimated that a Rate of $63 per enrollee will be sufficient to meet statutory reinsurance payments.
How will Reinsurance Fees be remitted? At this point, we know that an informational return and payment of the Reinsurance Fee must be made to HHS, but the reporting and payment mechanisms (e.g., paper or electronic returns, checks or electronic funds transfer) have not yet been announced.
Has HHS changed anything regarding Reinsurance Fee remittance? Future rulemaking will confirm HHS’ approach. But in the preamble to its October 30, 2013 guidance, HHS announced two noteworthy possible revisions:
- HHS announced its intention to alleviate some of the burden of the Reinsurance Fee by requiring payments in two installments, in the months of January and December following its invoice to insurers and/or plans. For example, following the invoice of December 15, 2014, it is anticipated that the $63.00 per enrollee will be payable in installments of $52.50 in January 2015 and $10.50 in December 2015.
- Additionally, HHS indicated that it may exempt certain self-insured, self-administered plans from the requirement to make reinsurance contributions for the 2015 and 2016 benefit years. Union health and welfare funds are wondering whether they may be getting relief through this buried sentence, found deep within a regulatory preamble that accompanied a 60-page final rule.
What should insurers and self-insured plan sponsors do now? The recent HHS comments indicate that prudent insurers and plan sponsors will closely watch for future rulemaking in this area. Also, even without additional details, from a budgeting perspective, it is important to build in reasonable Reinsurance Fee reserves beginning with the 2014 year (first payable in 2015).