On December 2, 2013, the Department of Health and Human Services (“HHS”) published new proposed rules addressing the transitional reinsurance fee program (the “Reinsurance Program”) established under the Affordable Care Act (“ACA”) that will affect self-insured plans and health insurance issuers. The proposed rules would:
- exempt self-insured plans that do not use a third party administrator (“TPA”) for their core administrative processing functions from the fee obligation for the 2015 and 2016 calendar years (but not for the 2014 calendar year); and
- allow contributing entities to make required payments in two installments.
Proposed Exemption for Self-Insured Self-Administered Plans
As reported in our December 2012 and April 2013 issues, the ACA directed the establishment of a Reinsurance Program in each State to help temporarily stabilize premium coverage rates for individual insurance coverage purchased through the State exchanges/marketplaces. Under the ACA, “health insurance issuers and third party administrators on behalf of group health plans” must make payments to fund the Reinsurance Program for the 2014 through 2016 calendar years. For payments relating to the 2015 and 2016 calendar years, however, the proposed rules interpret the ACA’s statutory definition of a contributing entity to exclude self-insured group health plans that do not use a TPA for their core administrative processing functions, i.e., adjudicating, adjusting, and settling claims (including the management of appeals), and processing and communicating enrollment information to participants and beneficiaries.
Noting that the ACA states that reinsurance contribution amounts are to reflect a “commercial book of business,” HHS concluded that self-insured group health plan administered by a TPA normally would be viewed as a part of the TPA’s “commercial book of business” while a self-insured, self-administered plan would not be viewed as part of any entity’s “commercial book of business.” Thus, such entities may be considered exempt. The proposed rules consider a TPA to be an entity that that provides administrative services to the plan in connection with claims processing or adjudication or plan enrollment, and is not under common ownership or control with the self-insured group health plan or its sponsor. The proposed rules also seek comment on the following:
- Whether other service providers may be considered TPAs (for example, attorneys who provide advice in connection with the adjudication of claims)
- Whether other TPA functions may be considered “core service functions,” such as medical management services and provider network development
- Whether a self-administered plan must perform core service functions for all of its plan benefits and services, to claim the exemption, or if a third party may administer a small percentage of the self-insured plan’s services
Given that most employer-sponsored health plans use TPAs for their core plan administration, the proposed exemption will likely affect only multiemployer plans with in-house administrative services.
Proposed Reinsurance Fees to Be Paid in Two Installments
Under previous guidance issued by HHS, contributing entities must submit, no later than November 15 of the 2014, 2015, and 2016 calendar years, an enrollment count of the number of covered lives for the applicable year to HHS. HHS would, in turn, notify the entity of the reinsurance contribution amount due within 30 days (or, if later, December 15 of the applicable year). The contributing entity would then have 30 days to submit the per-capita payment (generally in the month of January following the 2014, 2015, and 2016 calendar years, as applicable). To ease the financial burden on contributing entities, the proposed rules would provide for the payment of the Program fees in two annual installments, with the first installment payment allocated to fund the Program, and the second installment reimbursing the US Treasury.
For the 2014 calendar year payment, HHS calculated the Program fee at $63.00 per covered life, allocating $52.50 per covered life to the first payment (i.e., payable in January, 2015, assuming the enrollment count is provided by November 15, 2014, and the payment is invoiced by HHS in December, 2014) and $10.50 per covered life to the second payment (i.e., to be invoiced in the fourth quarter in 2015 and payable late in the fourth quarter of 2015). For the 2015 calendar year payment, the $44 per covered life contribution rate payment would be allocated as follows: $33 per covered life allocated to the first payment (i.e., payable in January 2016, assuming the enrollment count is provided by November 15, 2015, and the payment is invoiced by HHS in December, 2015) and $11 per covered life to the second payment (i.e., to be invoiced in the fourth quarter in 2016 and payable late in the fourth quarter of 2016). HHS intends to publish the 2016 contribution rate in late 2015.
The proposed rules request comments on whether to provide contributing entities with the option to pay the entire reinsurance contribution amount with the first installment at the beginning of the year following the applicable calendar year. HHS will accept public comments on this issue and the rest of the Proposed Rules through January 2, 2014.
Next Steps for Employers and Plan Sponsors
While the proposed rules provide some welcome relief, contributing entities must continue to work towards ensuring that they can submit their respective annual enrollment counts to HHS for payment of the 2014 fee no later than November 15, 2014. If you have questions about the proposed rules and their possible impact on your group health plan’s eligibility for a possible fee exemption for the 2015 and 2016 calendar years, please contact the Trucker Huss attorney with whom you normally work.