Health E(fx) Legislative Alert: Deadline for the ACA’s Transitional Reinsurance Fee

November_15_Deadline

November 15, 2014, is the deadline for submitting the required information and scheduling the transitional reinsurance payment, which must be done through Pay.gov.

 

 

What Is the Transitional Reinsurance Fee?

The Affordable Care Act (ACA) provides for a transitional reinsurance program to help stabilize premiums for coverage in the individual health insurance market during the first three years of operation of the Health Insurance Marketplaces (2014-2016). The program is designed primarily to transfer funds from the group market to the individual market, where high-risk individuals are more likely to be covered.

Payments to individual market insurers under the reinsurance program are funded by “contributions”; and although some refer to this payment as a “tax,” we will refer to these contributions as “fees.” These fees are payable by health insurance issuers and third-party administrators on behalf of self-insured group health plans. However, under the regulations, self-insured group health plans are ultimately responsible for the payment.

Final regulations were published on March 16, 2012. These regulations have been modified frequently and the most current may be found at §45 C.F.R. 153.400, et seq.

 

Fee Amount

The transitional reinsurance fee requirement applies on a per capita basis with respect to each individual covered by a plan subject to the fee (“covered life”). The total amount for 2014 is $63 per covered life, and decreases to $44 per covered life in 2015.

 

Who Is Responsible for the Fee?

The fee, as defined, is imposed on the “contributing entity,” defined as an insurer (fully insured coverage) or the group health plan offering self-insured coverage. TPAs, ASO and others may submit on behalf of contributing entities; however, CMS has clearly stated that these groups have no requirement to do so under the law. Since the fee is imposed on the self-insured plan, not the sponsor as an entity, plan assets may be used to pay the assessment. The IRS has noted that plan sponsors may treat the fee as an ordinary and necessary business expense for tax purposes, thereby making it deductible to the company.

In the case where a plan offers options that are both self-insured and fully insured, and any option that separately provides major medical coverage, the insurer would be responsible for the fee under the insured benefit options and the plan would be responsible for the fee with respect to covered lives under the self-insured benefit options. Special and specific rules apply for plans that may be partially self-funded and partially fully insured or if a plan changes from self-funded to fully insured (or vice versa) during a calendar plan year.

 

How to Count Lives

Covered lives are not just your employees. In benefits, we refer to these as members or “belly buttons.” So everyone covered under the plan (including spouse, dependents, retirees, and COBRA participants) must be included. There are permissible counting methods that may be used. The methods of counting lives for the reinsurance fee are similar to the methods for the Patient-Centered Outcomes Research Institute (PCORI) fee, but plans should not rely on the PCORI method. You may choose any allowed method, but the same method must be used for a full benefit year and across all plans. The counting period is generally the first nine months of the calendar year (except for the 5500 method) regardless of the plan year.

 

Counting Options for Insured Plans

Actual Method: Add the total number of covered lives for each day of the first nine months of the benefit year, and then divide that total by the number of days in those nine months.

Snapshot Count Method: Add the total number of covered lives on any date during the same corresponding month in each of the first three quarters of the year, and then divide that by the number of dates on which a count was made. The date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter.

Member Months/State Form Method: Multiply the average number of policies in effect for the first nine months of the benefit year by the ratio of covered lives per policy in effect, calculated using prior NAIC exhibit or a form with the issuer’s state of domicile.

 

Counting Options for Self-Insured Plans

Actual Method: Add the total number of covered lives for each day of the first nine months of the benefit year, and then divide that total by the number of days in those nine months.

Snapshot Count and Snapshot Factor Method:

  • Count: Add the total number of covered lives on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters of the year, then divide that by the number of dates on which the count was made. Note that the date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter.

  • Factor: Add the total number of covered lives on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters of the benefit year, divided by the number of dates on which a count was made (note that the date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter). Then, add the number of participants with self-only coverage and the product of the number of participants with coverage other than self-only coverage and a factor of 2.35.

Form 5500 Method: For a plan offering more than self-only coverage (dependent or spousal coverage), add the number of participants at the beginning and end of the plan year from the most current Form 5500 (line 5 and 6a-6c). For a plan offering self-only coverage, perform the same calculation, but divide this number by 2.

 

Note: Your choice of method may have a significant impact on the calculation of covered lives and therefore the fee owed. Choose a method that minimizes the fee, because once you register and set the count, the fee is auto-calculated and you must set payment timing and method. You must also maintain full documentation of the count for at least 10 years. CMS may audit a plan to assess its compliance with the program requirements, and it will be crucial to be able to produce this information. Health E(fx) is validating the configuration of the current methods (Form 5500 method will require your form input for full calculation) and will release these in the coming days.

 

Submitting the Fee

The entire process will take place on Pay.gov. CMS opened the form on October 24, 2014; however, CMS has not issued guidance regarding any delay to the November 15, 2014, deadline. Given that HPID was delayed, everyone was hopeful. But given the late date, it is best to assume the November 15 deadline is here to stay. In order to successfully and fully complete the transitional reinsurance fee submission, you must:

  • Register on Pay.gov
  • Fill out the Transitional Reinsurance Form
  • Attach supporting documentation
  • Schedule your payment

The form requires basic company and contact information, payment type, benefit year, and the annual enrollment count using one of the methods discussed.

You will be required to upload a Supporting Documentation CSV file that must contain specific company information, and the annual enrollment count and the benefit year. Note that the file has certain technical requirements, including file size and prohibition on certain special characters.

Last but not least, is the payment. The form will auto-calculate the amount owed. Plans will need to schedule payment for this amount, the form will not submit without payment information. Plans can choose to remit payment for the entire benefit year at once (the full $63 per covered life), or plans may submit two separate payments for the year. If the separate payment method is selected, the first payment ($52.50 per covered life) is due January 15, 2015, and the second payment ($10.50) is due November 15, 2015. CMS suggests leaving 30 days between the form submission and payment date. The payment must be scheduled by November 15, 2014, regardless of the method chosen. If the two-payment option is chosen, you will need to submit the same form and supporting documentation, with the exact information, twice.

ACH payment is currently the only accepted payment method, but an invoice may be sent should there be problems with your payment. Plans need to add a particular ALC+2 value with the applicable bank to ensure the payment is processed correctly; the company name for ACH purposes is “USDEPTHHSCMS.”

 

What Should You Do to Prepare?

To prepare for the November 15, 2014, deadline, first collect your count information. (Health E(fx) current self-insured customers with full history of nine months of data can refer to the system for count information—all methods other than 5500 at this time. For those customers who are in implementation, you will need to file this year without Health E(fx) and can use the system for the 2015 filing). Second, prepare a CSV file, and third, notify your bank of the applicable ALC+2 value.

Please contact your Health E(fx) Client Team or your Benefits Consultant for additional information.

 

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