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Updated 12/8/2016 – Ensure Sufficient Fees are Available for Scheduled Payments

 

Applicable contributing entities who have registered with Pay.gov for the payment of their 2016 transitional reinsurance fee should be reminded that a scheduled payment will be made from the assigned bank account on 1/15/2017.  For employers who chose to remit the entire fee in one payment, the full $27.00 per covered life will be deducted from the bank account.  For employers who chose to remit the fee in two separate payments, $21.60 per covered life will be deducted from the bank account on that date.

 

Action Item

Employers should ensure that the associated bank account holds the necessary funds for the upcoming scheduled payment.

 


 

Background

The transitional reinsurance fee is an ACA fee paid to the Transitional Reinsurance Program, which aims to help stabilize the insurance premiums in the individual Marketplace. The program is temporary and fees will exist for calendar years 2014, 2015, and 2016; therefore 2016 is the final year for the fee.

 

Who must pay the transitional reinsurance fee?

  • For self-insured plans, the health plan (or the employer) is the “contributing entity” responsible for paying the fee. However, the plan may choose to use a third party administrator to make the payment on its behalf.
  • If the self-insured plan is also self-administered and they do not use a third party administrator for core administrative functions (e.g., claims processing, adjudication, or enrollment), then they are excluded from paying the transitional reinsurance fee.
  • For fully-insured plans, the health insurance carrier is the “contributing entity” responsible for paying the fee, although the cost may be passed on to the employer.

 

What types of health plans are subject to the transitional reinsurance fee?

Only plans that provide major medical coverage are subject to the transitional reinsurance fee. Major medical coverage is defined as health coverage which may be subject to reasonable enrollee cost sharing for a broad range of services and treatments, including diagnostic and preventive services, as well as medical and surgical conditions. Therefore, the following types of plans are excluded from the transitional reinsurance fee: excepted benefits health plans (e.g., stand-alone dental and vision plans); prescription drug-only plans; HRAs that are integrated with a group health plan; HSAs; FSAs; and EAPs, wellness programs, and disease management programs that do not provide major medical coverage.

 

How much is the transitional reinsurance fee?

The fee is $27.00 per covered life in 2016.  Self-insured group health plans may choose from one of four methods to calculate the number of covered lives.

  • Actual count method: add the total lives covered for each day of the month for the first nine months of the calendar year and divide that total by the number of days in those first nine months.
  • Snapshot count method: add the total number of lives covered on a 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, and divide that total by the number of dates on which a count was made. Same corresponding months would be (1) January, April, and July; (2) February, May, and August; or (3) March, June, and September.  Note that the dates used in the second and third quarter must be within the same week of the quarter as the date used for the first quarter.
  • Snapshot factor method: add: (1) the number of covered lives with self-only coverage and (2) the number of covered lives with other than self-only coverage multiplied by 2.35, on one date during the same corresponding month in each of the first three quarters of the benefit year, and divide that total by the number of dates on which a count was made. Same corresponding months would be (1) January, April, and July; (2) February, May, and August; or (3) March, June, and September.  Note that the dates used in the second and third quarter must be within the same week of the quarter as the date used for the first quarter.  For example, if the plan has 25 individuals with self-only coverage and 20 individuals with other than self-only coverage on each counting date, then there are 72 covered lives: (25 + (20 x 2.35)).
  • Form 5500 method: for plans with self-only coverage, add the total number of lives at the beginning and end of the benefit year, as reported on Form 5500, and divide by two. For plans with self-only and other than self-only coverage, add the total number of lives at the beginning and end of the benefit year, as reported on Form 5500.

 

If the employer has a third-party administrator (TPA) for an eligible plan, the TPA typically assists in determining the number of covered lives per benefit year.

 

How is the fee remitted and when is the deadline?

For the 2016 benefit year, contributing entities must register on Pay.gov and enter the annual enrollment count on the “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” by 11/15/16. The contributing entity will need to schedule the payment by entering banking information and selecting to either pay the entire 2016 contribution of $27.00 per covered life in one payment by 1/17/2017, or in two separate payments, with the first remittance of $21.60 per covered life due 1/17/2017 and the second remittance of $5.40 per covered life due 11/15/2017.

 

Action Item

Employers with self-insured plans that are not self-administered should calculate the covered lives for each applicable plan in 2016 and schedule their payments with Pay.gov by 11/15/16.

Additionally, for employers who chose to schedule two separate payments for the 2015 benefit year, the second payment of $11.00 per covered life will be paid from the applicable bank account by 11/15/16. Such employers should ensure that the bank account contains the necessary funds for the scheduled payment.

 

More Information

The CMS website provides details on the transitional reinsurance program.  Any questions may also be e-mailed to reinsurancecontributions@cms.hhs.gov.

 

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Bonnie Mangels – Bonnie is the Corporate Counsel and Senior Compliance Manager for Sequoia. When not inundated in paperwork and legal briefs, her interests include arts and crafts, bunnies, and the Bay Area.