- 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
- 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.
- 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.
- What Steps do Self-Funded Employers Need to Take?
There will be a streamlined membership and contribution process through www.pay.gov. Pay.gov is a secure, web-based application 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, must begin collecting the data, calculating their annual enrollment count and preparing the supporting documentation in advance of the November 15, 2014 compliance date. Additionally, a reporting entity will need to complete the following steps:
1. Register on pay.gov
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 is now available on www.pay.gov. See “Additional Resources” to download “The Form” and access the Annual Enrollment and Contributions Submission Form Manual.
3. Upload the supporting documentation. See "Additional Resources" for Supporting Documentation File Layout and Supporting Documentation Job Aid Manual..
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
- More information on the snapshot method
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.
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.
Please note, when determining the average number of covered lives for the reinsurance fee, the annual covered lives counts will be based on the first nine months of the calendar year, regardless of when the employer’s plan year begins. Self-funded employers that became self-funded on or after October 1 of the reporting year will have no membership to report. Therefore, they will have no reporting obligation and will not be required to register on http://www.pay.gov/. This does not apply when a self-funded employer changes TPA to Cigna.
California Network plans
If you offer Network (Point-of-Service) plans to individuals in California, special circumstances may apply. Click here to learn more
- What resources are available for membership reporting?
To help navigate our membership reports, Cigna has developed a Membership Reporting Training to assist you with the eligibility data needed for the average covered lives calculation required for the reinsurance fee. The training will guide you through accessing the self-service reports based on the appropriate portal for your plans/policies.
Please note, our membership reports are not intended to be uploaded into http://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.
These reports will be available by October 15th each year and will be provided at no additional cost. The reports will be available on existing portals: CignaAccess.com and the Client Resource Portal (CRP).
- Additional resources