The fee will apply to former employees and their dependents receiving COBRA continuation coverage.
In the case of fully insured employers, the fee will be paid by insurers. For self-funded plans, third-party administrators are to remit the fee on behalf of their clients.
The fee will not apply to retirees enrolled in Medicare and receiving supplemental coverage from their former employers. However, the fee would be assessed on retired employees not yet eligible for Medicare and receiving health care coverage from their former employers.
Exempted plans still include HCFSAs, HSAs, stand-alone dental and vision plans, most EAPs, disease management and wellness plans.
Original Post Continues->
HHS (the Department of Health and Human Services) issued additional guidance on the three-year transitional reinsurance program that is established under the Affordable Care Act (PPACA) to help stabilize premiums in the individual health insurance market during the period 2014 through 2016. The fee has been set at $63 per health care plan participant (this includes employees and dependents). For fully-insured plans this fee will be paid by carriers (insurers) and built into the rates for 2014; self-funded plans are liable for the fee but may use TPAs (Third-Party Administrators) to remit the fee on behalf of the plan sponsor.
I am an Employer that Sponsors a Plan for my employees. Why must I pay a fee that will go to carriers/insurers that provide individual health insurance policies?
Short answer: Because that’s what the new law requires. PPACA Section 1341(c)(1)(A) states that the purpose of the reinsurance contributions is “to help stabilize premiums for coverage in the individual market” during the first three years the individual Exchanges are in operation, “when the risk of adverse selection related to new rating rules and market changes is greatest.” Insurers that end up covering more than their share of high-cost individuals in the Exchange will be eligible for reimbursement of a percentage of claims that exceed a specified attachment point.
How much is the “National Per Capita Contribution Rate”?
The annual per participant fee for 2014 will be $63.00 ($5.25 per month) and is scheduled to decrease in 2015 and 2016. The rate was calculated by dividing the 2014 annual amount of $12 billion (set by PPACA) by the estimated number of enrollees in plans required to make transitional reinsurance contributions. [The specified annual amount for 2015 is $8B (which would yield a rate of $42/participant) and it is $5B for 2016 (yielding a $26/participant)]. The $63.00 per-covered-member-rate is a national uniform contribution rate and does not vary by state.
Are there any plans that are exempt from this fee?
Only “major medical” plans are required to pay this reinsurance contribution fee. The introductory comments to the regulations defines these plans as plans that cover a broad range of treatments and services, including preventive, diagnostic, medical & surgical services, each/all/any of which may be provided on an inpatient, outpatient or emergency room setting. The following will not be required to pay this fee:
Integrated with HDHP plans – HRAs and HSAs
HCFSAs (Health Care Flexible Spending Accounts)
EAPs (Employee Assistance Program)
Dental & Vision plans that are offered on a Stand-Alone basis
Should I just add up my employees, their spouses and children and prepare to pay my fee?
That would be a good start, but don’t forget to include your COBRA QBs and Retirees too. [COBRA QBs (Qualified Beneficiaries) count. And, any former employees enrolled in your retiree medical plans (if they are not yet Medicare eligible. Note: Supplemental, employer-provided Medicare coverage participants would not count towards your total number of participants). Also, at this time, there is no “Retiree-Only” exception to the headcount and the fees owed]. If you would like to comment to HHS and CMS, your comments must be received at one of the addresses listed in the regulations (link below) by 5:00 p.m. on December 31, 2012.
How will I pay my company’s fee?
That will depend on how your plan is insured or funded.
Fully Insured Major Medical Plans – carriers/insurers are responsible to pay this fee (most have already indicated that they will add this fee into their rates).
Self-Funded Health Plans – the Employer/Plan Sponsor is responsible to pay the fee but may use a TPA (Third Party Administrator) or ASO (Administrative Services Only) contractor to remit the fee on their behalf.
When am I expected to pay these fees?
This fee will be collected annually by HHS. Previous guidance indicated this would be paid/assessable quarterly. The expected timeline is:
11/15/2014: Plans and Carriers/Insurers send their headcounts to HHS. 12/15/2014: HHS sends a bill to those entities (fees are due within 30 days).
01/15/2015: Payment is made to HHS.
Similar time frames will apply in 2015 and 2016.
Is this a tax-deductible expense?
Yes, the fee is a tax deductible expense to carriers/insurers and plan sponsors (self-funded plans). HHS guidance says the DOL has deemed these reinsurance contributions as valid plan expenses under ERISA.