ACA Transitional Re-Insurance Fee – 11/15 Deadline

The Affordable Care Act (ACA) includes an additional provision that many people are not fully aware of, the Transitional Re-Insurance Fee. This fee, due November 15, was implemented to help fund some of the changes mandated by the ACA. Below is a summary of the November 15 submission to the Department of Health and Human Services (HHS), and the subsequent payment of the fee.

The ACA 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, the insurance company will typically collect the Transitional Reinsurance Fee through premium rates. Self-funded plans fund and remit the Reinsurance Fee themselves.

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 (PCORI) 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.
            
Available Methods for Calculating Covered Lives

• 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.

Fee Amount
Consistent with the proposed regulations, the annual fee will be $63 per covered life for 2014. The fee may be paid from plan assets as a permissible plan expense under ERISA.  (Note: This is entirely different and more substantial from the PCORI fee, which was $2 per covered life and due on July 31 via filing Form 720 with the IRS.) 

Due Date
Plans must submit their enrollment counts to HHS by November 15 of each applicable year. The first enrollment counts are due November 15, 2014.

How to Submit Membership Counts to HHS
The federal government issued guidance on May 22, 2014, outlining how to submit the annual enrollment count to HHS:

• Use a form from www.pay.gov. Pay.gov is a web-based application where forms may be retrieved and online payments to government agencies can be submitted by credit card or by debit from a checking or savings account. The form will auto-calculate fee amounts based on membership data entered.
• Payment information and scheduling payment dates for the Reinsurance Fee contributions will be handled using this site.
• Employers must submit the number of covered lives by November 15, 2014.

HHS will provide details on the submission of enrollment counts and contributions in future guidance. As of recent check, the form is not yet posted to the website.

Payment Information
Within 30 days, HHS will notify the plan of its required contribution amount. 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 January 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 January 15. The second installment of $10.50 goes to the U.S. Treasury and is due in the 4th quarter of 2015.

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

Please contact us if you have any questions about the ACA Transitional Re-Insurance Fee.