Posted on behalf of Mark Holloway, J.D. – Senior Vice President and Co-Director – Lockton Compliance Services
The U.S. Department of Health and Human Services (HHS) has issued proposed regulations that address the requirements that would apply to health insurance policies offered in the public insurance exchanges (aka marketplaces). The proposed rules codify some changes already announced by the federal regulators and provide further guidance on the calculation and payment of the transitional reinsurance fee.
Transitional Reinsurance Program
The transitional reinsurance fee is payable by insurers on behalf of insured major medical plans and by employers (or other plan sponsors) on behalf of self-funded major medical plans (although third-party administrators – TPAs – may pay the fee on behalf of self-insured plans). Stand-alone dental and vision programs and health flexible spending account programs are exempt from the fee (assuming they meet the definition of “excepted benefits” under the law). The fee is intended to help create a backstop for insurers covering high-risk individuals through the insurance exchanges.
For 2014, the tax is $63 per covered life ($5.25 per month). For 2015, the annual transitional reinsurance fee would drop to $44 per covered life ($3.67 per month). For 2015 and 2016, self-insured, self-administered plans would be exempt from the fee. 
In order to qualify, the self-funded plan could not use a third party administrator in connection with claims processing or adjudication (including the management of appeals) or plan enrollment. This exemption is intended to apply to self-administered multiemployer (union) health plans and would have limited application to most employer plans.
HHS has clarified the reinsurance fee would only apply to major medical coverage that provides “minimum value” (i.e., that has an actuarial value of at least 60 percent). Recall that for employers subject to the play or pay mandate, the employer’s offer of employee-only coverage must not only be considered affordable, it must also provide minimum value, or the employer risks penalties. Any coverage – either insured or self-funded – that fails to meet the minimum value threshold will be exempt from the transitional reinsurance fee.
Lockton comment: This clarification is good news for employers who want to offer “skinny plans” to employees as an alternative for lower-wage employees to satisfy the individual mandate.
For plans that use the Form 5500 method for determining headcount for the transitional reinsurance fee, the new rules change the references from “benefit year” (i.e., the calendar year) to “plan year”to clarify that a self-insured group health plan that operates on a noncalendar year may use the enrollment data on its Form 5500 to determine the number of enrollees with respect to whom it must pay the transitional reinsurance fee.
Lastly, as previously announced,HHS will collect reinsurance contributions in two installments: one part at the beginning of the calendar year following the applicable benefit year (e.g., $52.50 in January 2015 for the 2014 fee), and the remaining part at the end of the calendar year following the applicable benefit year (e.g., $10.50 in late 2015 for the 2014 fee).
Other Items That Apply in 2015
- States that choose to operate their own exchanges would need to notify HHS by June 15 of the preceding year (previously the deadline was January 1 of the preceding year).
- The open enrollment period under the exchanges will extend beyond December 15 for an additional month (so that the open enrollment period for 2015 will run from November 15, 2014 to January 15, 2015).
- The following limits on cost sharing will apply for non-grandfathered exchange policies:
- Out of pocket maximum: No greater than $6,750 for self-only and $13,500 for family
- Maximum annual deductible for small group policies: No greater than $2,150 for self-only and $4,300 for family
- New patient safety standards for exchange plans would apply in 2015, but no word yet on the reporting requirements that might apply to employer plans.
- HHS has unveiled a new minimum value calculator that health plans will use to determine whether they provide 60 percent actuarial value.
- The federal government will continue to apply the 3.5 percent user fee on insurers who offer coverage on the federally-facilitated exchanges in order to recoup its costs for operating the exchanges.