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Paying Reinsurance Fees: Complicated Process
Health Care Reform Bulletin Provided by FNA Insurance Services, Inc.

September 8, 2014

Another new health reform fee, often called the reinsurance fee, is affecting employers. Although carriers will pay the assessment on behalf of a fully-insured plan, the final cost will be passed through to employers sponsoring health plans. The third party administrators (TPA) for self-insured plans may report and pay the fee, but are not required to do so. The employer is responsible for the reporting if the TPA declines to take on this responsibility. In addition, the fee must be paid using a specific method which itself presents compliance challenges especially for some self-funded organizations.
Executive Summary

In 2014, the federal government will assess a $63 fee per covered life based on group health plan participation that is being characterized as a reinsurance fee. (Note that the fee is not based on number of employees, the number of full-time employees, or the number of enrolled employees.) The fee is the same regardless of the funding method – so insured and self-funded plans are liable.

Stated generally, the fee is intended to help stabilize premiums for coverage in the individual market during the first three years of “Exchange” operation (2014, 2015 and 2016) as preexisting condition exclusions have fallen away and individuals with potentially higher-cost medical needs gain insurance coverage. Reinsurance fund are therefore intended to help “shore up” possible losses by carriers participating in the Exchanges.

Reinsurance contributions are required for major medical coverage which is defined as either a catastrophic plan or health coverage for a broad range of services that provides minimum value. The following outlines coverage that may provide for medical care but have been deemed not subject to the reinsurance fee.

•    Plans consisting solely of excepted benefits (i.e. dental and vision)
•    Health Reimbursement Account (HRA) that is integrated with an underlying medical plan (either fully or self insured)
•    Health Savings Accounts (HSAs)
•    Health Flexible Spending Accounts (Health FSA)
•    Employee assistance program, disease management program, or wellness program that does not provide major medical coverage
•    Plans consisting solely of prescription drug benefits

Staggered Fee Collection

HHS will collect the reinsurance fees from issuers and plan sponsors in all states, including states that elect to operate their own Exchanges. HHS has also announced a modified “two-part” fee collection schedule.

The first part will start at the start of the calendar year following the applicable benefit year; and then a second near the close of that calendar year. Under the two-part system, if submitting as a single payment, the full $63 per covered life is due by the date shown below. If electing to submit two payments, the first $52.50 is paid by January 1, 2015 and the second installment of $10.50 is paid by November 15, 2015.

Key dates for payment

• November 15, 2014 – Group health plan counts due to HHS via Pay.gov.
• January 15, 2015 – Initial payment due date when paying via installments. Last day to make the full payment,        
  if paying in one installment.
• November 15, 2015 – The due date for making the second installment of the 2014 payment.

Contribution Process

Previously, the final rules provided that a plan can condition eligibility on a “cumulative-hours-of service” requirement of up to 1,200 hours (almost six months for a full-time worker). A waiting period, which cannot exceed 90 days, can begin on the first day after the employee satisfies the hour’s requirement. This is one-time eligibility requirement for the first year of employment and cannot be imposed in subsequent years unless the individual is deemed to be a new employee.

Contribution amounts must be made through an ACH transfer through Pay.gov. Payments cannot be made via check or credit card. Forms and further instructions are available on www.Pay.gov and are summarized below.

Recently, the Center for Medicare Services (CMS) held a series of webinars addressing the reinsurance fee detailing how the process works. Employers interested in reviewing this information can gain access through http://www.REGTAP.info.

CMS implemented a streamlined approach of four basic steps for completing the reinsurance contribution through Pay.gov.  

Step One; Register on Pay.gov if the contributing entity does not currently have an account

•    In this step the employer will be creating a user profile with information that will be used to pre-populate other forms. Information required includes name, address, telephone number, legal business name and billing address.

Step Two: Complete the Contribution Form

•    Log into Pay.gov and search for the “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” (currently not available).
•    Although information is pre-populated from the Pay.gov profile, additional information is required for two more contacts, including name, address, telephone number and title. A contact should be someone who can discuss               information submitted on the Form and supporting documentation.
•    Select “type of payment” based on the preference for making a contribution. As noted above, payments can be made in two installments or one combined payment.
•    Select 2014 for the Benefit Year reporting and insert the gross annual enrollment count.
•    Check the box verifying the annual enrollment and check the box for the Acknowledgement statement.

 To determine the “gross annual enrollment count” there are four methods a self-insured group can use. As a reminder, the count is based on the first nine months of the calendar year.
  • Actual count
  • Snapshot count
  • Snapshot factor count
  • Form 5500 count

The Department of Health and Human Services (HHS) has issued Examples of Counting Methods for contributing entities which can be found at: https://www.regtap.info/uploads/library/RI_CountMethodEx_5CR_072114.pdf

Step Three: Upload supporting documentation

•    Supporting documentation must be provided in a file layout meeting specific requirements. The file layout document can be found on REGTAP (Info under “Reinsurance Contributions”).
•    Step Four: Enter Payment Information
•    Besides the pre-populated information, the payment date, account holder name, checking or savings account type, bank routing number and bank account number is required to be entered.
•    Payment will be automatically deducted from the designated account on the dates selected.

The transitional reinsurance fee for 2014 is due to be reported by November 15, 2015. CMS has stated that the same process, as generally described above, will more than likely be the same process for 2015 and 2016. FNA will continue to watch for any updates on this fee and communicate them in future Client Bulletins.

Preparation Tips

•    Start collecting information for the Reporting Entity (which generally is also the contributing entity)
o    Legal Business Name (LBN)
o    Federal Tax Identification Number (TIN)
o    Billing contact name, title, email address and phone
o    Reporting entity’s billing address
o    Reporting entity’s two additional submission contacts name, title, email address and phone number
o    Contributing entity’s 2014 annual enrollment count
o    Authorizing officer name, title, email address and phone number
o    The employer should contact its bank to have an ALC+2 value added to allow for automatic debits (if applicable)
•    This code should be confirmed with the bank
•    It is a security feature called an ACH Debit Block, ACH Positive Pay or ACH Fraud Prevention Filter
•    Ask the band for the reinsurance contribution submission code

•    Register on Pay.gov
o    If scheduling two payments
o    Complete and schedule for the first collection payment
o    Duplicate the Form and schedule payment for the second collection

Helpful links

HHS Notice of payment parameters

IRS and Reinsurance fee deductibility

HHS offers training on the pay.gov collection process. To receive notices from HHS regarding upcoming trainings and review training resources, register on www.regtap.info

Payment Registration

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© 2014 FNA Insurance Services, Inc. All Rights Reserved
The discussion presented in this document is informational in nature and is not (and should not be construed as) a legal opinion or legal advice. We would be happy to discuss any information above with you or your attorney.