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ACA UPDATE: Transitional Reinsurance Fee 2016

Employee Benefits

Form Due Tuesday November 15, 2016

Overview

The Transitional Reinsurance Fee is a temporary fee created by the Affordable Care Act (ACA) placed upon health insurers and self-funded plans with the intent of funding the first three years of the insurance exchange (Marketplace) program.  The fee is set to retire at the end of 2016.

Here is a breakdown of the important details for employers regarding this fee:

  • What is it? The fee is for the transitional reinsurance program which is established to assist in stabilizing the premiums for coverage in the individual marketplace.  The program will be in effect from 2014-2016.
  • Who does the fee apply to? The fee applies to all employer sponsored health insurance plans, fully insured and self-funded.
  • Who pays the fee? This depends upon the funding mechanism of a health plan.  If an employer sponsors a fully insured plan, the carrier pays the fee on the employer’s behalf.  If the employer sponsors a self-funded plan, the employer will have to report enrollment counts and pay the fee.
  • How much is the fee? In 2016, the fee drops is $27 per covered life under the plan.
  • When is the fee due? Enrollment counts are due by November 15, 2015.  Payments must be scheduled at the same time that enrollment counts are submitted.  The payment can be paid in total by January 16, 2017 or made in two installments:  $21.60 is due by January 17, 2017 and the remainder $5.40 is due by November 15, 2017.
  • How do I determine enrollment counts? There are several different methods for determining enrollment counts:  the actual count, snapshot, snapshot factor and 5500 methods.  Here is an overview of those methods:
    • Actual count: Count the number of covered lives each day for the first nine months of 2016 and divide by the number of days.
    • Snapshot: Pick one day each quarter for the first three quarters of the year and divide by 3.
    • Snapshot Factor: In the case of self-only and other than self-only coverage (family, employee + one or employee + children) determine the sum of: (1) the number of participants with self-only coverage, and (2) the number of participants with other than self-only coverage multiplied by 2.35.
    • Form 5500: Use the counts from your Form 5500 by adding the number of participants at the beginning of the year and the number of participants at the end of the year.
  • How do employers with self-funded health insurance plans complete the submission? You will enter enrollment counts and pay the fee on pay.gov.   The form is available for all employers by clicking here.
  • Do I need to pay the fee on any other plans? The fee only applies to major medical plans.  It does not apply to “excepted benefits” (stand-alone dental, vision), HRAs (regardless of whether integrated with fully insured or self-funded plans), HSAs, FSAs and EAPs and wellness programs that do not provide major medical coverage.

Key Takeaway

Employers should review their health plans to determine if the reinsurance fee applies to their plan, how they will count employees and when they will pay this temporary fee. Please consult an attorney with expertise in employee benefits to help guide your decision-making if you have questions.

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