- Executive Summary
The health care reform law includes a temporary Reinsurance Fee, also known as the "Reinsurance Assessment" - a total of $25 billion to be collected from 2014 through 2016. Most of the money will be used to fund a reinsurance program, which is intended to lessen the impact of adverse selection in the individual market.
The fee is scheduled to raise $12 billion in 2014, with reductions in each of the next two years -- to $8 billion in 2015 and $5 billion in 2016. (For the specifics, please see the link to Cost and Payment Details.)
- What Employers and Plans are affected by the Reinsurance Fee?
Insurers and HMOs, as well as employers with self-funded major medical plans, are required to pay the fee.
The fee applies to all insured and self-funded individual and group major medical plans that are commercially funded.
- HMO, Network, PPO and OAP
- Guaranteed Cost or Shared Returns including Minimum Premium
- California Maximum Premium plans
- AEB plans in Alabama and Texas
- Group retiree medical plans covering individuals who are not eligible for Medicare or for whom Medicare is the secondary payer
- Active employees age 65+
- Pre-65 retirees
- Administrative Services Only (ASO) expatriate plans
- Short-Term Abroad (STA) expatriate plans
- Medical plans that are integrated with a Health Reimbursement Account (HRA)
- What Employers and Plans are Exempt from the Reinsurance Fee?
The reinsurance fee applies only to major medical plans. The following types of plans are not subject to the reinsurance fee:
- Stand-alone pharmacy and behavioral health plans
- Stand-alone dental and vision plans
- Hospital indemnity and specified disease plans
- Private Medicare, Medicaid, CHIP, state and federal high-risk pools and basic health plans
- Retiree-only plans for 65+ where Medicare is the primary payer
- Health Savings Accounts (HSAs)
- Flexible Spending Accounts (FSAs)
- Employee Assistance Plans (EAPs), disease management programs and wellness programs
- Stop-loss and indemnity reinsurance policies
- Military health benefits
- Indian Health Service coverage
- Insured expatriate coverage
- Who is Responsible for Administering Payment of the Reinsurance Fee?
If your plan is insured, you will not need to do anything. Your insurer or HMO is responsible for paying the fee based upon the number of covered lives.
For self-funded plans, the fee is the responsibility of the employer. However, a third-party administrator (TPA) can facilitate the process on behalf of the self-funded plan, but the responsibility still remains with the self-funded employer.
- How is Cigna Assisting Self-funded Employers?
There will be a streamlined membership and contribution process through www.pay.gov.
Pay.gov is a secure, web-based application owned by the Federal Government that will serve as the portal where employers can report and submit the required membership data elements. Registration on pay.gov is required in order to complete the reinsurance process.
As part of the membership and contribution process, a contributing entity, e.g. the employer or insurer making the contribution, can begin to collect the data, calculate their annual enrollment count and prepare the supporting documentation.
Additionally, a reporting entity will need to complete the following steps:
(1) Register on pay.gov, including self-funded employers
(2) Access and complete the form on pay.gov, titled "ACA Transitional Reinsurance Program Annual Enrollment and Contribution Submission Form," to report the annual membership count(s). The form’s availability will be announced at a later date, and Cigna will communicate as soon as it becomes available.
(3) Upload the supporting documentation
(4) Enter payment information (e.g. payment date, banking information, etc.)
(5) Self-funded employers should contact their bank to have the the ALC+2 value added to allow for automatic debits (if applicable)
Cigna will support self-funded employers in understanding the process and their responsibilities to pay the fee. We will not be able to complete the process on behalf of clients, but we will support them by providing resources, information and client service representatives to answer their questions.
In addition to client service support and the opportunity to ask questions, Cigna will also assist clients by supplying the membership information they will need to report and calculate their fee using the snapshot method.
Please note, our membership reports are not intended to be uploaded into www.pay.gov as part of the submission process. Rather, they are intended to provide the average covered lives count to assist with the submission process.
More Information on the Snapshot Method
The regulations provide several methods for calculating the average number of covered lives used to determine the reinsurance fee. Cigna will use the “snapshot” method for our insured clients and for the membership reports and calculations we provide for self-funded clients.
Under the snapshot method, the average number of covered lives is determined by counting the total number of lives covered on January 1, April 1 and July 1 of each year and dividing that total by three. The fee is determined by multiplying the average number of covered lives by the annual fee amount, which may be split into two installments, or paid all at once if the employer or insurer chooses to do so.
California Network plans
If you offer Network (Point-of-Service) plans to individuals in California, special circumstances may apply. Click here to learn more.
- Cost and Payment Details
What will it cost?
- $63 per member per year (PMPY) in 2014 ($52.50/$10.50, respectively)
- $44 PMPY in 2015 ($33.00 / $11.00, respectively)
- Estimated $25-$30 PMPY in 2016 (end reinsurance fee)
When is it first due?
- If the 2014 fee is paid in two installments, then the first installment of $52.50 per average covered life is due no later than January 15, 2015. The second installment of $10.50 per covered life will be due no later than November 15, 2015.
- If the 2014 fee is paid as a combined payment, then it is due no later than January 15, 2015.
- Insured: Insurer pays (included in premium)
- Self-funded: Employer pays. However, a third-party administrator (TPA) can facilitate the process on behalf of the self-funded plan, but the responsibility remains with the self-funded employer.
Is the Reinsurance Fee tax-deductible? Yes.
- Are more Reinsurance Fee resources available?