HHS Proposes Installment Payments for Reinsurance Fee

posted on

One of the provisions under the Patient Protection and Affordable Care Act (Health Care Reform aka ACA) requires health plans to pay a Transitional Reinsurance Program Fee beginning with calendar year 2014. The TR fee is payable on a calendar year basis, not plan year, and is to fund reimbursements to individual market health insurers who enroll high risk individuals over the period of calendar years 2014, 2015 and 2016. The intent is that these reimbursements will help to stabilize premiums in the individual health insurance market, thus making that coverage more affordable.

The TR fee applies to insured and self-insured major medical plans and health reimbursement arrangements (HRAs) that are not integrated with the employer’s major medical plan if the HRA reimburses expenses other than dental or vision expenses, only. The TR fee does not apply to a Health Care FSA.

The actual TR fee per covered life is a function of the statutory fund established for each of the three calendar years divided by the total of covered lives in all plans. For 2014, the estimated TR fee is $63 per covered life per year, or $5.25 per covered life per month. The statutory fund amount decreases in 2015 and 2016, so the TR fee per covered life will be less in each of those years.
The plan counts the covered individuals using one of three regulatory methods (actual count, snapshot count or Form 5500 count) and reports the count of covered individuals for the first 9 months of the calendar year to HHS no later than November 15 each year. HHS then notifies the plan of the total TR fee owed for the calendar year within 30 days of the date the count was reported (no later than December 15). The TR fee is payable no later than the following January 15th (e.g., the 2014 TR fee is due no later than January 15, 2015).

The total $63 per covered life TR fee is actually split between the amount necessary to provide the reinsurance reimbursements ($52.50) and the administrative expenses of providing the reimbursements ($10.50). HHS has proposed that the plan would pay the $52.50 amount per covered life in a first installment in January and the $10.50 administrative amount as a second installment in the 4th quarter of the year.

The issuer of an insured health plan and the sponsor (employer) of a self-insured health plan pays the TR fee to the Department of Health and Human Services (HHS) for each covered life (covered individual) under the plan (i.e., employee, spouse and dependents), including individuals covered through COBRA continuation. The TR fee also applies to retiree only health plans, except for those retirees or family members who are entitled to Medicare.

Finally, HHS proposed that self-insured group medical plans, including HRAs, would not owe the TR fee for calendar years 2015 and 2016 if the plan is self-administered (e.g., the employer administers the claim reimbursements and enrollment for the self-insured plan).

Categories: Health Care Reform, Compliance | Tags: PCOR Fee , HRA , Health Care FSA | Return