Employers that sponsor health plans are bracing themselves for a significant tax hit under health reform.
Health reform’s transitional reinsurance program, which will require insurers and self-funded plans to pay billions of dollars to partly reimburse commercial insurers writing individual policies for patients with very high medical costs, imposes large costs on employers to further the federal health reform agenda.
Proposed rules by the U.S. Department of Health and Human Services describe a regime under which reinsurance funds would be transferred from states with healthier populations and fewer people in individual policies, to sicker states with more individual policies.
Self-insured employer health plans and insurers are on the hook for the fees. Employers estimate that the first-year assessment for the three-year program, which begins in 2014, is expected to be in a range of $60 to $90 per health plan participant. As a result, the largest employers are looking at bills in the millions of dollars.
The goal of the program is to make the individual market more affordable and to combat the uninsured problem in the United States, HHS says in the proposed rules. It is intended to alleviate the need to build into premiums the risk of enrolling high-risk, unhealthy individuals.
Third-party administrators will make contributions on behalf of self-funded plans, but those plans are ultimately liable for reinsurance contributions, and TPAs and administrative-services contractors are to be used to administer the fee payments.
Exclusions for Non-major Medical
Health coverage that is not major medical coverage will be excluded from reinsurance contributions, including: privately run Medicare and Medicaid plans; health reimbursement arrangements, health savings accounts and flexible spending accounts; employee assistance, wellness and disease management programs; stop-loss and indemnity coverage; military health benefits; and coverage for American Indian Tribes.
There is no indication that HHS will drop fees for retiree-only plans for former employees. Employers hoped the government would institute this exception as a means to encourage employers to sponsor such plans.
There is also nothing in the proposal indicating that COBRA-qualified beneficiaries would not be included in calculating the fee paid by employers.
For more information, see the Health Reform Law, What Employers Need to Know, from Thompson Information Services.