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On March 11, 2013, the U.S. Department of Health and Human Services published a
final rule that will enable plan sponsors and insurers to calculate their liability under the transitional reinsurance fee provisions of the Patient Protection and Affordable Care Act (PPACA)
Beginning in 2014 (and continuing for 2015 and 2016), employers and other sponsors of self-funded health plans, as well as insurance companies offering insured health plan products, are subject to the PPACA's transitional reinsurance fee. This fee is designed to fund reinsurance payments to health insurance issuers that cover high-risk individuals in the individual market. The transitional reinsurance payments are intended to stabilize insurance premiums in the individual market during 2014, 2015 and 2016 as consumers and insurers become more comfortable with the state health insurance exchanges
The transitional reinsurance fee applies to grandfathered and nongrandfathered health plans, as well as to retiree health coverage (unless it is secondary to Medicare or qualifies for another exception)
The final HHS regulations clarify several items regarding the calculation and payment of transitional reinsurance fees, including the following:
The fee applies only to plans providing major medical coverage, which is defined as health coverage for a broad range of services and treatments, including diagnostic and preventive services, as well as medical and surgical conditions in inpatient, outpatient, and emergency room settings. The following types of coverage are excluded from the transitional reinsurance fee:
Plan sponsors have several alternatives for counting the number of covered lives for purposes of the fee, including:
Qualified beneficiaries receiving COBRA continuation coverage are counted for purposes of determining the transitional reinsurance fee. The fee is tax deductible as an ordinary and necessary business expense (unlike the
Patient-Centered Outcomes Research Institute (PCORI) fee, which is an excise tax and is not tax deductible
To the extent that a self-funded health plan is funded through a voluntary employees' beneficiary association (VEBA) trust or otherwise, the transitional reinsurance fee may be paid from plan assets under the Employee Retirement Income Security Act (ERISA) rules. A plan sponsor that offers multiple plans may aggregate plans to avoid double counting covered lives
Plan sponsors and insurers are required to report their enrollment counts by Nov. 15 of each year (2014, 2015 and 2016). HHS then will provide a notice of fee liability by Dec. 15, and the plan sponsor or insurer will have 30 days to remit the transitional reinsurance fee to HHS
Brian M. Pinheiro is partner-in-charge of the Employee Benefits and Executive Compensation Group at law firm
Ballard Spahr LLP.
© 2013 by Ballard Spahr LLP. All rights reserved. Reposted with permission. Editor's Note: This article should not be construed as legal advice.
Related SHRM Articles:
Prepare for the PPACA's Transitional Reinsurance Fee,
SHRM Online Benefits, December 2012
Final Rule on Comparative Evidence "PCORI" Fees,
SHRM Online Benefits, December 2012
Related External Article:
What Self-Funded Plans Should Know About the Transitional Reinsurance Fee, Bloomberg BNA, April 2013
Health Care Reform Resource Page
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