The ACA establishes a Transitional Reinsurance Program to help stabilize premiums for coverage in the individual market during the years 2014 through 2016. The statute requires all health insurance issuers and Third-Party Administrators, on behalf of self-insured group health plans, to make contributions under this program to support payments to individual market issuers that cover high-cost individuals.
Regulations specify that self-insured group health plans are liable for the contributions, although a plan may utilize a Third-Party Administrator (or administrative-services-only contractor) for transfer of the contributions.
The fee applies to all “major medical coverage” but excludes “excepted benefits” and other plans specifically excluded in the proposed rules.
Stand alone dental and vision plans, specific disease plans, hospital indemnity plans accident/disability income plans, and TRICARE supplements are all “excepted benefits”.
Stop loss/reinsurance, HRAs, FSAs and prescription only plans are specifically excluded in the proposed rules. HSAs are specifically excluded if integrated with a self-insured group health plan or health insurance. EAPs, disease management programs and wellness programs are specifically excluded unless they provide major medical coverage.
By November 15 of each year, plan sponsors must submit the number of covered lives subject to the fee for that calendar year. Reporting is done on the first 9 months of the calendar year (January through September) regardless of plan year.
Payments can be made in one or two installments. If the plan sponsor elects to make the payment in two installments, the first payment is due by the first January 15following the November 15 reporting date and the second payment is due by the following November 15..
If the plan sponsor elects to make the payment in one installment, the entire amount is due by the first January 15 following the November 15 reporting date.
Nov 15, 2014
Jan 15, 2015
Nov 15, 2015
Nov 15, 2015
Jan 15, 2016
Nov 15, 2016
Nov 15, 2016
Jan 15, 2017
Nov 15, 2017
The amount due by the plan is equal to the average number of covered lives times the applicable dollar amount outlined below.
The fee imposed on a plan sponsor is based on the average number of lives (participants and dependents) covered under the plan from January through September. The proposed regulations offer a choice of methods to determine the average number of lives.
Actual Count Method. The Actual Count Method requires a contributing entity to add the total number of lives (enrollees) covered for each day beginning January 1 and ending September 30 (in the year which the reporting is due) and divide that total by the number of days in those nine months.
Snapshot Method. The Snapshot Count Method requires a contributing entity to add the total number of covered lives of enrollees on any date during the same corresponding month in each quarter of the benefit year, and divide that total by the number of dates on which a count was made. The date(s) used for the second and third quarters must fall within the same week of the quarter as the corresponding date(s) used for the first quarter.
Snapshot Factor Method. The Snapshot Factor Method requires a contributing entity to add the total number of covered lives on any date during the same corresponding month in each quarter of the benefit year, and dividing that total by the number of dates on which a count was made. The date(s) used for the second and third quarters must fall within the same week of the quarter as the corresponding date(s) used for the first quarter.
This method varies from the original Snapshot Method because the number of lives covered on a date is calculated by adding: (1) the number of participants with self-only coverage on that date; and (2) the product of the number of participants with coverage other than self-only coverage on the date and a factor 2.35.
Form 5500 Method. Under the Form 5500 Method, the number of covered lives for the most current plan year is calculated based upon the “Annual Return/Report of Employee Benefit Plan” filed with the Department of Labor (Form 5500) for the last applicable time period.
For purposes of this counting method, the number of lives covered for the plan year for a plan offering only self-only coverage equals the sum of the total participants covered at the beginning and end of the plan year, as reported on lines 5 and 6(a)-(c) of Form 5500, divided by 2. The number of lives covered for the plan year for a plan offering self-only coverage and other than self-only coverage equals the sum of the total participants covered at the beginning and the end of the plan year, as reported on lines 5 and 6(a)- (c) of the Form 5500. (Can only be used by self-funded plans that have filed a Form 5500 for the prior plan year.)
Plan sponsors (or a TPA on behalf of a plan sponsor) must submit the covered life count information through www.pay.gov. The website will then automatically calculate the fee that is due. During the submission process, the plan sponsor will be required input their bank account information and schedule future payments dates for the payment to be made via ACH.
The Department of Labor has advised that paying required contributions under the Reinsurance Program would constitute a permissible expense of the plan for purposes of Title I of the Employee Retirement Security Act (ERISA) because the payment is required by the plan under the Affordable Care Act as interpreted in the proposed rule issued by the Department of Health and Human Services. This means that the TRF is tax deductible.
A sponsor of a self-insured group health plan that pays Reinsurance Program contributions may treat the contributions as ordinary and necessary business expenses, subject to any applicable disallowances or limitations under the Code. This treatment applies whether the contributions are made directly or through a Third-Party Administrator or administrative-services-only contractor.
Note: If RCI administers your group health plan, we can provide you (at your request) with the average number of covered lives that were on your plan for the applicable plan year using the Actual Count Method, Snapshot Method and Snapshot Factor Method.
We can also submit the required reporting and set up the payment schedule on the plan’s behalf for an additional fee.