ACA Pathways: Attention Self-insured Plan Sponsors - Transitional Reinsurance Fee Deadline Fast Approaching
November 01, 2016
Entities that are required to contribute to the Affordable Care Act (ACA)'s transitional reinsurance fee program (Contributing Entities) must submit their ACA Transitional Reinsurance Program Annual Enrollment Contributions form and supporting documentation for the 2016 benefit year to the Department of Health and Human Services (HHS) no later than November 15, 2016.
November 15, 2016 is also the deadline for Contributing Entities to make the 2nd installment payment of $11.00 per covered life for the 2015 fee if a combined payment of $44.00 per covered life was not previously made.
The ACA established the transitional reinsurance program to help stabilize premiums for coverage in the individual market during the first three years of Marketplace operation (2014, 2015 and 2016) when individuals with higher-cost medical needs gain coverage. This program imposes a fee, referred to as the transitional reinsurance fee, on both health insurance issuers and most self-insured group health plans. The fee amount is based on a national contribution rate, which HHS announces annually. For 2016, the annual contribution rate is $27.00 per covered life per year ($2.25 per month). Individuals who are receiving continuation coverage (such as COBRA coverage) are included in the number of covered lives under the plan.
For insured health plans, the issuer of the health insurance policy is required to pay the transitional reinsurance fee. For self-insured plans, the plan sponsor is liable for paying the fee, although a third-party administrator (TPA) or administrative-services-only (ASO) contractor may pay the fee at the plan's direction. For a plan maintained by a single employer, the employer is the plan sponsor.
Note that for 2015 and 2016, self-insured group health plans that are self-administered (i.e., those that do not use a TPA in connection with the core administrative functions of claims processing or adjudication or plan enrollment), are excused from paying the fee.
2016 Benefit Year Payment and Collection Schedule
Determining the Number of Covered Lives
Self-insured group health plans may use one of four methodologies for determining the average number of covered lives to base the calculation on:
- The Actual Count Method. Under the Actual Count Method, the average number of covered lives is determined by adding the totals of lives covered for the first nine months of the benefit year and dividing that total by the number of days in those nine months.
- The Snapshot Count Method. Under the Snapshot Count Method, the average number of covered lives is determined by adding the total number of lives covered on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters (for example, March, June and September) of the benefit year, and dividing the total by the number of dates on which a count was made.
The same months must be used for each quarter, and the date used for the second and third quarter must fall within the same week of the quarter as the corresponding date used for the first quarter. A Contributing Entity may also use last day of each month, regardless of the actual week that the day falls in.
- The Snapshot Factor Method. The Snapshot Factor Method can only be used by self-insured group health plans and multiple group health plans maintained by the same plan sponsor that do not include an insured plan. Like the Snapshot Count Method, this method involves adding the total number of covered lives on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters of the benefit year and dividing that total by the number of dates on which a count was made. The same months must be used for each quarter (for example, March, June and September), and the date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter. Contributing entities may use last day of each month, regardless of the actual week that the day falls in.
Under this method, the number of lives covered on a date is calculated by adding the number of participants with self-only coverage on the date and the product of the number of participants with coverage other than self-only coverage on the date and a factor of 2.35.
- The Form 5500 Method. Under the Form 5500 Method, for a plan that offers both self-only coverage and dependent (family) coverage, the average number of covered lives is based on the sum of the total number of participants covered at the beginning and the end of the most current plan year as reported on the Form 5500. For example, a plan that files its 2015 Form 5500 by October 15, 2016 may use those enrollment counts for the Form 5500 Counting Method to calculate the reinsurance fee for the 2016 benefit year.
The 2016 Annual Enrollment and Contributions Submissions Form Manual is available at https://www.regtap.info/uploads/library/RIC_2016SubFormManual_5CR_091616.pdf, and a 2016 Supporting Documentation Job Aid Manual is available at https://www.regtap.info/uploads/library/RIC_2016SupDocManual_JobAid_5CR_091616.pdf.
For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:
This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.
Back to News & Publications