Legal Alerts

25 Jun 2013

Governmental Health Plans are Subject to Health Care Reform Reinsurance Fees in 2014

Effective in 2014, the health care reform law provides for an annual reinsurance fee through 2016 that must be paid by certain health plans. In March, the Department of Human Services issued regulations implementing the reinsurance fee. The regulations clarify that although governmental entities are exempt from tax and from most of ERISA, health plans maintained by governmental entities for their employees generally will be subject to the reinsurance fee.

An exception from the reinsurance fee requirement does apply to certain health insurance coverage that is not part of the issuer’s commercial book of business; but, the regulations do not treat a governmental health plan as being noncommercial unless the coverage is offered for a reason other than an employment relationship or a former employment relationship.

The reinsurance fee is collected by the Department of Health and Human Services (HHS) and paid to insurance companies to ease the transition of providing health coverage to individuals regardless of their health status. The fee is calculated based on both (1) the cost of providing subsidies to insurance companies for individuals with defined high risk health status and (2) the cost of collecting the fee and paying the subsidies. The required reinsurance fee will be $63 per covered employee for 2014, and will decrease each year until 2016 (the final year the fee applies).

Self-insured group Governmental Health Plans are Subject are excluded from receiving subsidies, but still must pay the fee. However, if a self-insured plan uses a third-party administrator (TPA), the plan can contract with the TPA to be responsible for paying the fee. For a fully insured plan, the insurer is responsible for paying the fee, but many insurance contracts provide that this cost will be passed through by the insurer to the employer sponsoring the plan.

Under the regulations, enrollment data must be provided to HHS by November 15 (generally calculated based on January through September data, even for non-calendar-year plans). HHS will notify the entity responsible for paying the fee (and for supplying the enrollment data), by the later of December 15 or 30 days after receiving the data, of the amount of the contribution for the year, and payment is due 30 days after notification.

Action Step – a self-funded governmental health plan, must understand its obligations in 2014 to pay the reinsurance fee. A fully insured plan should review insurance contracts to determine whether the fee is passed through in order to understand the its financial obligation beginning in 2014.

Please contact Dannae Delano for more information about how the reinsurance fee applies to your employee health coverage or any other benefits-related inquiries.

 


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