A proposed rule put on public display Nov. 26 adjusts Transitional Reinsurance Program rules and tries to put out fires left burning by the ever-moving target of health care reform. For example, it proposes a lower contribution level insurers and self-funded plans would pay in 2015 to a transitional reinsurance fund, and gives employers the ability to pay in two installments. It would make it easier for insurers to qualify for risk payments in 2014.
The Centers of Medicare and Medicaid Services was published in the Dec. 2 Federal Register. It is open to public comment until Jan. 2, 2014.
Lower Reinsurance Fees in 2015
The government proposes lowering the transitional reinsurance fee to $44 per insured life per year in 2015, down from $63 per person per year in 2014. The program is designed to partially reimburse commercial insurers for individuals with high health care costs. Under the program, states set up reinsurance funds to cover insurers’ losses brought on because of new requirements imposed by health care reform.
Over a three-year period, insurers and self-funded group health plans must fund pay into the fund in proportion to the number of lives they cover.
The program is designed to stabilize premiums in the face of significant new coverage obligations the law requires. These include the full panel of 10 essential health benefits, automatically renewal of policies, the elimination of preexisting condition exclusions, and compliance with other reform-law coverage mandates.
Employers would be able to pay the transitional reinsurance fee in two installments under the HHS proposed rules.
The first-year assessment would remain at $63 for each health care plan participant. However, employers could make a payment of $52.50 per participant, then an additional $10.50 per participant payment late in the fourth quarter of 2015.
For the 2015 plan year, the $44-per-participant reinsurance fee could be paid in two installments: $33 in January 2016 and then $11 per covered life in the fourth quarter of 2016.
Lower Attachment Point for Insurers in 2014
Under the proposal, the government would make it easier for insurers offering plans on health insurance exchanges to qualify for risk payments in 2014. At the moment, the government’s reinsurance plan will pay 80 percent of claims above a $60,000 attachment point. Under the proposed rule, the government would pay insurers 80 percent (the coinsurance rate) of claims greater than $45,000 in 2014.
This is in response to the government’s announcement that it will allow insurers to renew cheap insurance policies in the individual and small group market that would have cancelled due to noncompliance with the reform law’s coverage mandates, but now can be renewed between Jan. 1, 2014, and Oct. 1, 2014. If the healthy people who had the cheap policies get to remain in a separate risk pool and don’t join the government’s risk pool, then insurers that comply with the 2014 market rules will experience a higher proportion of expensive claims. The lower attachment point is designed to address this, the proposal stated.
The attachment point would jump back up to $70,000 in 2015; there would be a $250,000 reinsurance cap; and the coinsurance rate would drop to 50 percent in 2015, under the agency proposal.
Also, if transitional reinsurance fees levied exceed the amount of claims, the government would increase its coinsurance rate to more than 80 percent in 2014 (and more than 50 percent in 2015) to ensure that all contributions collected are spent on insurers’ claims that year, the agency said. Here is a fact sheet on the proposal.
For more information on health reform’s fees on self-funded plans, see Section 795 of The New Health Care Reform Law: What Employers Need to Know.