Transitional Reinsurance Fee — HHS Issues Final Regulation
The U.S. Department of Health and Human Services has published final regulations that will enable plan sponsors and insurers to calculate their liability under the transitional reinsurance fee (TRF) provisions of the Patient Protection and Affordable Care Act. The fee is $63 per year, per covered life ($5.25 per month). It applies to insured and self-insured group health plans beginning in 2014. .
The TRF applies to calendar years 2014 through 2016. This fee is expected to decrease in 2015 and 2016. The first TRF payment will be owed to HHS in December 2014 with respect to the 2014 calendar year. Congress would need to amend the law to extend the TRF beyond 2016. The final regulation is effective May 10, 2013.
When drafting the Patient Protection and Affordable Care Act (PPACA), Congress tapped employers and insurers to bear the cost of a temporary reinsurance fund that will seek to stabilize premiums for coverage in the reformed individual health insurance market (inside and outside the exchanges) for a three-year period from 2014 through 2016.
Insurers and plan sponsors are permitted to deduct the TRF expense as an ordinary and necessary business expense (unlike the Patient-Centered Outcomes Research Institute (PCORI) fee, which is an excise tax and is not tax deductible).
The final rule provides that TRF contributions must be made with respect to “major medical coverage.” COBRA coverage generally qualifies as major medical coverage and if no other exception applies, it will be subject to the TRF contribution. The TRF contribution must be made for all “reinsurance contribution enrollees,” which includes all individuals covered by a plan for which reinsurance contributions must be made — employee, spouse, and children. . The TRF contribution is determined by multiplying the average number of covered lives of reinsurance contribution enrollees during the applicable benefit year (the calendar year) by the contribution rate for the applicable benefit year.
The final rule provides several methods for counting covered lives. Insured plans may use an actual count method, snapshot method or member-months method. Self-insured plans may use an actual method, snapshot method or Form 5500 method. The preamble clarifies that a plan would not have to use the same counting method for the TRF calculation that is used for purposes of the PCORI fee.
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