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Reinsurance Fee

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Reinsurance Fee

Summary

The Affordable Care Act requires contributions to be paid by health insurance issuers and self-funded group health plans to fund a Transitional Reinsurance Program in place from 2014 to 2016. The program then pays insurers in the individual market that cover high risk individuals. The Department of Health and Human Services (HHS) establishes standards to determine high-risk individuals, a formula for payment amounts, and the contributions required of insurers, which must total $25 billion over the three years.

For fully insured plans, UnitedHealthcare will collect the Transitional Reinsurance Fee through premium rates. Self-funded plans fund and remit the Reinsurance Fee.

Fee amount

The Reinsurance Fee is assessed on a per capita basis and is $5.25 per member per month ($63 per member per year) in 2014. It decreases each year for the subsequent two years. In 2015, the fee is $3.67 per member per month ($44 per member per year) and is yet to be determined for 2016.

The health reform law specifies the total amounts of the Reinsurance Fee that must be collected for the Reinsurance Program: $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016, totaling $25 billion.

Fee schedule

Information released by the government on June 25, 2014, states the Reinsurance Fee can be paid in two installments or one payment. If submitting as one payment, the full amount is due by Jan. 15. If paying in two installments, for the 2014 calendar year, of the $63 per member per year rate, the first installment of $52.50 goes to reinsurance payments and administrative expenses and is due Jan. 15. The second installment of $10.50 goes to the U.S. Treasury and is due in the 4th quarter of 2015.

Membership counts are determined based on the first nine months of the calendar year. The membership count only needs to be submitted to HHS once per year.

Fee payment

An "ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form" will be available on pay.gov. Here, a contributing entity will provide basic company and contact information, the annual enrollment count for the applicable year, upload supporting documentation, schedule a payment date(s) and submit payment information no later than November 15. The form will auto-calculate the contribution amounts. Entities will choose if they want to submit the Reinsurance Fee in one full payment or two installments. Payment will be automatically deducted from the designated account on the dates selected.

HHS will offer training on this process. Self-funded customers should register to receive notices regarding upcoming trainings.

2014 payment schedule

  • Nov. 15, 2014 – Membership counts due to HHS via pay.gov.
  • Jan. 15, 2015 – The due date for making the first payment, if paying in two installments. Last day to make the full payment, if paying in one installment.
  • Nov. 15, 2015 – The due date for making the second installment of the 2014 payment.

Membership Count

The Reinsurance Fee is based on membership count (covered lives – employees, spouses and dependents) for the first nine months of the year. Reinsurance Fee applies to group health plans and counts must be submitted on a per plan basis.

The IRS proposed four methods for determining the average number of members. These are the same methods that may be used to calculate the Patient-centered Outcomes Research Institute Fee. (A different counting method may be used for each fee.) Issuers must use the same method consistently for the duration of any year and the same method for all policies subject to the fee.

Actual Count: Count the total covered lives for each day of the plan year and divide by the number of days in the plan year.

Snapshot dates: Count the total number of covered lives on a single day in a quarter (or more than one day) and divide the total by the number of dates on which a count was made. (The date or dates must be consistent for each quarter.)

Snapshot Factor: In the case of self-only coverage, determine the sum of: (1) the number of participants with self-only coverage, and (2) the number of participants with other than self-only coverage multiplied by 2.35.

Form 5500 Method (Annual Return/Report of Employee Benefit Plan): For self-only coverage, determine the average number of participants by combining the total number of participants at the beginning of the plan year with the total number of participants at the end of the plan year as reported on the Form 5500 and divide by 2. In the case of plans with self-only and other coverage, the average number of total lives is the sum of total participants covered at the beginning and the end of the plan year, as reported on the Form 5500.

  • This is the most accessible method for employers. It is a form that administrators or sponsors of an employee benefit plan subject to ERISA must file information about each benefit plan every year.
  • The customer "looks back" to the Form 5500 filed for the last applicable time period.

Exclusions

The Reinsurance Fee is paid once per covered life on plans that provide minimum value. Certain types of coverage is excluded from the Reinsurance Fee:

  • Coverage that is not major medical (standalone vision and dental, health savings accounts, Part D prescription drug benefits, etc.)
  • Supplemental coverage (i.e., HRA)
  • Secondary coverage (i.e., Medicare)
  • Coverage that does not meet minimum value

For More Information

Frequently Asked Questions

What is the reinsurance fee?

The reinsurance fee is a transitional fee to stabilize the individual market. The fee will be assessed on a per capita basis for both fully insured and self-funded members.

The fee funds a reinsurance program for high cost claimants in non-grandfathered individual market plans, both on and off the Exchange.

When does the fee go into effect?

The fee is effective Jan. 1, 2014. Contributing entities must begin making payments on an annual basis, and the first payment is due on or before Jan. 15, 2015.

Is this fee permanent or temporary?

The reinsurance fee is established as a temporary fee for the three years from 2014 to 2016.

Does the fee apply to fully insured groups and self-funded groups?

Yes. The fee applies to both fully insured and self-funded groups.

Who is expected to pay the fee?

The fee applies to both fully insured and self-funded business.

  • For fully insured customers, UnitedHealthcare will pay the fee. UnitedHealthcare will collect the Transitional Reinsurance Fee through premium rates, when approved by the state. The fees are prorated, so they are spread over 12 months.
  • Self-funded plans must fund the Reinsurance Fee.
Can states also collect fees in addition to what the federal government will collect under the reinsurance fee?

Yes. State reinsurance assessments, however, which would be in addition to the federal assessment, have not yet been determined.

Are groups exempt based on size?

No. There is no exemption for small group health plans.

Are non-profit entities (for example, a Catholic diocese) exempt from the reinsurance fee?

8/22/12: No. The reinsurance fee does not contain an exception for church plans, such as a Catholic diocese. TPAs are required to pay the fee on behalf of the self-funded plan.

What are the dollars collected going to be used for?

The fee funds a reinsurance program for high claimants in non-grandfathered individual market plans both on and off the Exchange.

Which types of entities does the fee apply to?

The fee applies to "contributing entities," which means a health insurance issuer, or a third party administrator on behalf of a self-insured group health plan, that offers one or more of the following plans or products:

  • Health plans for active employees (private and public sector)
  • Retiree health plans
  • Behavioral health
  • Pharmacy benefits
  • Individual market plans, including student health plans
  • Exchange plans
  • Grandfathered plans
  • Executive medical plans
What types of coverage are excluded from the fee?

The following are not impacted:

  • Medicare Advantage plans
  • Part D prescription drug benefits
  • Expatriate-only plans
  • Medicare supplement coverage that meets the requirements of section 1882(g)(1)
  • Stand-alone vision and dental (FI and ASO)
  • Coverage for specified diseases or hospital indemnity coverage
  • Accident only coverage
What is the financial impact of the fee?

The Reinsurance Fee is assessed on a per capita basis and is $5.25 per member per month ($63 per member per year) in 2014. It decreases each year for the subsequent two years. In 2015, the fee is $3.67 per member per month ($44 per member per year) and is yet to be determined for 2016.