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Temporary Transitional Reinsurance Fee



Summary

The Affordable Care Act (the Act) imposes the Temporary Transitional Reinsurance Fee on group health plans. The purpose of the transitional reinsurance fee is the help stabilize premiums for coverage in the States individual Marketplace (Exchange) beginning Janaury2014.

Timing

The fee begins in 2014 and continues through the end of 2016. The fee will be collected by the Health and Human Services (HHS) annually. Health Plans are required to submit the plan’s average number of covered lives to HHS by November 15 of each year. By December 15, or within 15 days of HHS receiving the average annual enrollment count, whichever is later, HHS will notify self-funded plans and insures of the reinsurance contribution amount for the appropriate year. Health plans must remit reinsurance contributions to HHS within 30 days of notification.

Who Pays the Fee

Self-funded group health plans must pay a fee of $5.25 per covered life per month in 2014. HHS is expected to reduce the fee in 2015 and 2016. Health Plans are required to submit the plan’s average number of covered lives to HHS by November 15 of each year. HHS will provide information regarding the actual process for submitting enrollment counts and contributions in future guidance. The final rule provides that the fees are a permissible plan expense because the payment is required by the plan.

Calculating the Fee

The fee is equal to the average number of covered lives for the first nine months of the calendar year. The annual contribution rate for 2014 is $63 per covered life or $5.25 per covered life per month. The fee is applicable to all enrollees in the plan, including employees, early retirees, COBRA participants, spouses and dependents.

Determining Average Number of Lives

Self-funded Plans

Self-funded plans may determine the average number of covered lives by using any of the following methods. Plans must use the same method consistently for the duration of any year and the same method for all policies subject to the fee.

  • Actual Count – Count the total number of covered lives for each day of the first nine months and divide by the number of days in the first nine months of the applicable year.

  • Snapshot Count – Count the total number of covered lives on a single day in each of the first three quarters (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, for the first three quarters, determine the sum of the 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 – 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 for the last applicable time period, 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 for the last applicable time period.

As with the PCORI counts, it seems the easiest method is to use one of the Snapshot options. Caprock HealthPlans will assist you in counting the number of covered lives using these two methods.

If you have any questions, please contact your Account Executive.

This communication is designed to provide a summary of significant developments to our clients. Information presented is based on known provisions. Additional facts and information or future developments may affect the subjects addressed. It is intended to be informational and does not constitute legal advice regarding any specific situation. Plan sponsors should consult and rely on their attorneys for legal advice.