Self-funded plans that are also self-administered will be made exempt from paying reinsurance contributions under the health care reform law for the 2015 and 2016 benefit years, the Centers of Medicare and Medicaid Services said in final program integrity rules.
The promised relief will occur in future rulemaking, according to the preamble of the program integrity rules. The change will remedy an imbalance under which self-funded plans, which operate without an insurer that funds the risk, would be paying into a fund they could not draw from. (Only insurers can draw payments from state reinsurance funds.)
The program integrity rules were posted for public inspection by CMS on Oct. 25 and are scheduled for official publication in the Oct. 30 Federal Register. Those rules deal with systems for financial integrity and oversight for participants in health insurance exchanges and how states must operate risk adjustment and reinsurance programs.
Remedies an Imbalance
In announcing the upcoming reinsurance program relief for certain self-funded plans, CMS noted that there will be caveats. The change will only be applied if the major medical component of the plan is self-insured, CMS states in the integrity rule preamble. It would not be applied if the plan carves out, say, a prescription drug benefit, to be self-insured and self-administered, while keeping a fully insured policy for major medical coverage, the preamble added.
CMS agreed to develop a more specific definition of “major medical coverage” for this purpose, which would add certainty for entities unsure whether they will need to contribute or not.
Those self-funded plans would be required to pay the first-year fee for the program in 2014, and that fee is $63 per plan life that is covered for all 12 months of the year.
For more information on the transitional reinsurance fee and other health care reform taxes, see Section 795 of the New Health Care Reform Law: What Employers Need to Know.
Rules Focus on Exchange Program Integrity
The surprise proposal is couched in the preamble of the larger rule. A fact sheet from CMS describes the purpose of that rule:
The overarching goal of the provisions in the final rule is to safeguard federal funds and to protect consumers by ensuring that issuers, [exchanges], and other entities comply with federal standards meant to ensure consumers have access to quality, affordable health insurance.
For example, the final rule requires that states reinsurance methodologies will have to be certified by third-party accrediting organizations. States will have to account for their risk-adjustment and reinsurance programs, and give reports on operations to HHS and the public to ensure the soundness and transparency of the programs. Records pertaining to risk adjustment, reinsurance and enrollment must be maintained for 10 years, the rule states.
Individual Subsidies
The rules also set program integrity standards to verify the financial need of individuals who use premium tax credits to buy subsidized insurance coverage on exchanges (known as Marketplaces).
CMS and the U.S. Department of Health and Human Services are authorized to oversee the financial integrity, compliance, efficiency and non-discriminatory administration of state exchanges, the rule states. CMS/HHS may levy fines on states to enforce its exchange-integrity rules. The feds expect individual exchanges to have separate design, structure and governance from small-business (known as SHOP) exchanges.
States that run their own exchanges have a bit more flexibility in running their own audit and compliance verification programs over individual and small-business exchanges. The rules are more prescriptive when exchanges are in partnership with the feds, and when exchanges are run by the federal agencies. The rules will take effect on Dec. 30, 2013.
For more information on state-based health insurance exchanges, see Section 810 of the Health Care Reform Law: What Employers Need to Know.