In accordance with the Affordable Care Act (ACA), health insurance issuers—or insurance carriers—along with self-funded group health plans, must fund transitional reinsurance programs that are in effect from 2014 to 2016. Health plans that meet minimum value are required to pay a reinsurance fee which is collected by the Department of Health and Human Services (HHS). Applicable fees are tallied by enrollment count for the first nine months of each calendar year. Enrollment count must be submitted each year by November 15.
Carriers are responsible for the reinsurance fee for any fully-insured groups, while employers using self-funded plans are liable for submitting counts, funding and paying reinsurance fees. In contrast with the PCORI fee, health reimbursement arrangements (HRAs) integrated with major medical do not have to pay this fee. The only exception is reinsurance fees are required for any group health plan that offers major medical.
How to Estimate Participants
There are several accepted methods self-insured group health plans can use to calculate their reinsurance fee. Despite the various accepted methods, all plans must use the same process consistently throughout any calendar year. Once that calendar year has expired, plans may use a different method the following year. Here are some of the accepted counting methods.
Plans can add the complete number of lives under coverage for each day of the first nine months of the plan year and divide it by the total number of days in those nine months.
For self-only coverage and any other than self-only coverage, you first calculate the total number of participants, such as employees or retirees, and the total number of participants with other than self-only plans and multiply this amount by 2.35.
Snapshot Count Process
The Snapshot count method requires you to add the total number of covered individuals on a given day in each day of the first three quarters and then divide that amount by the number of days on which you made a count. Those dates should be the same each time the count is calculated.
The Form 5500 Count
This count relies on the Annual Return/Report of the Employee Benefit Plan from the most recent year. There are a few ways to use this count. For self-only coverage, the rate can be determined by calculating the average number of participants in the plan and adding the total number of participants from the start of the plan year to the absolute total participants by the plan’s year end, which has been reported on the Form 5500, and divide that number by 2.
For any plan with both self-only and other than self coverage, you can use this method by calculating the average number of total individuals covered from the plans beginning to the end of the plan’s year, according to the reported Form 5500.
More Than One Plan
Any self-funded plan that has more than one self-funded plan, such as medical and pharmacy options, can treat their plans as a single self-funded plan to avoid the fee associated with double counting lives on the plan.
Schedules for Fees and Payment
The reinsurance fee may be submitted in either a single payment or a maximum of two payments by January 15, 2017. Should you opt to make the two installment payment for the 2016 year for $27 per member, the first portion of the fee totaling $21.60 per member will go to reinsurance payments and any administrative expenses which are also due on January 15. The second payment of $5.40 will be taken by the U.S. Treasury and must be paid by November 15, 2017. Any employers who pay their 2015 fee in two installments must pay the final installment of $11 per member by November 15, 2016.
The Federal government provides guidance for the best way to submit your annual enrollment count. Here’s their recommendation.
- Find the form on Pay.gov and use it as a guide.
- Give your company’s contact information, enrollment count for the correct year, and upload any documents required.
- The site will calculate your contribution totals.
- Choose whether you’ll pay your reinsurance fee in a single or double payment, and submit scheduled payments as necessary.
- Your payments will be taken from your account on the dates chosen.
- Be sure to notify your bank and share your Agency Location Code to the list of companies that approve of ACH debits. Make sure you complete this step to avoid any missed payments and added fees.
- Make your count and submit the total number of covered individuals on your plans via Pay.gov by no later than November 15.
Frequently Asked Questions
What is the purpose of the reinsurance fee as mentioned in the Affordable Care Act (ACA)?
The reinsurance fee under the ACA is designed for health insurance issuers and self-funded group health plans to fund transitional reinsurance programs, which were in effect from 2014 to 2016.
Who is responsible for paying the reinsurance fee and when is the deadline for enrollment count submission?
Insurance carriers are responsible for the reinsurance fee for fully-insured groups. For self-funded plans, the employers are liable. The enrollment count for determining the fee must be submitted each year by November 15.
Are there exceptions to which health plans need to pay the reinsurance fee?
Yes, health reimbursement arrangements (HRAs) integrated with major medical do not have to pay the reinsurance fee. The only exception is when a group health plan offers major medical; in this case, reinsurance fees are required.
How can self-insured group health plans estimate the number of participants for reinsurance fees?
They can use several methods including: the Individual Count, Snapshot Factor, Snapshot Count Process, the Form 5500 Count, or if they have more than one self-funded plan, they can treat them as a single plan to avoid double counting. It’s crucial that they use the chosen method consistently within a calendar year, though they can switch methods the following year.