- Executive Summary
The health care reform law includes a temporary “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 high-dollar claims in the individual insurance market.
The assessment 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.)
In early 2014, Cigna will be contacting self-funded clients to determine their preference – self-administer and pay the fee themselves or authorize Cigna to manage and facilitate payment on behalf of their plan.
- What Employers and Plans are Affected by the Reinsurance Assessment?
Insurers and HMOs are required to pay the fee. So too are employers with self-funded major medical plans.
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 invididuals 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
- What Employers and Plans are Exempt from the Reinsurance Assessment?
The reinsurance assessment applies only to major medical plans. The following types of plans are not subject to the reinsurance assessment:
- 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 Assessment?
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 assessment is the responsibility of the employer, but Cigna can administer the payment on your behalf if you authorize Cigna to do so.
- How is Cigna Assisting Self-funded Employers?
In early 2014, you will be receiving an electronic letter from us asking you whether you would like us to administer the fee payment on your behalf, or pay the fee on your own. If you authorize Cigna to pay this fee to the Department of Health and Human Services (HHS), Cigna will not charge for this service.
The regulations identify alternative methods for determining the number of covered lives to be used in calculating the reinsurance contribution amounts. If you authorize Cigna to calculate and administer the payment of the reinsurance contribution amount on behalf of your self-funded group health plan, Cigna will use the “snapshot” counting methodology.
To determine the average number of covered lives for each calendar year, we will count the total number of lives covered under your Cigna-administered group health plan. This snapshot will capture the enrollment counts on three specific dates in the first three quarters each year and divide that total by three. This is the same counting method that Cigna will use for calculating the reinsurance contribution that we are required to make for our insured plans.
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
- $63 per member per year (PMPY) in 2014
- $44 PMPY in 2015
- $25-$30 PMPY in 2016 (end of Reinsurance Assessment)
When is it first due?
- January 2015. Cigna will pay the annual Reinsurance Assessment to the Department of Health and Human Services (HHS) within 30 days of due date notification; the payment will be made no later than January 15.
- Proposed regulations issued in November 2013 have proposed that the Reinsurance Assessment be paid to the Department of Health and Human Services (HHS) in two annual installments. For example, for the 2014 fee of $63 per person, $52.50 would be due on January 15, 2015 and the remaining $10.50 per person would be due late in the fourth quarter of 2015. Cigna is evaluating the potential impact of this change.
- Insured: Insurer pays (included in premium)
- Self-funded: Employer is responsible (may choose to have third-party administrator facilitate payment on employer’s behalf)
Is the Assessment tax-deductible? Yes.
- The Reinsurance Assessment… Just the Facts