Reform Alert - News from the Blues' Office of National Health Reform

Reinsurance fee will fund program to subsidize individual plans

Update: March 14, 2013 - CMS issues final rule on reinsurance program

Sep. 25, 2012

The transitional reinsurance fee, also referred to as "reinsurance contributions," will be paid by health insurance issuers (for applicable fully insured coverage) and third-party administrators (for applicable self-funded coverage). The fee, paid on a quarterly basis beginning in January 2014, will be a per-capita assessment remitted to the federal Department of Health and Human Services or to state reinsurance entities, as applicable.

The reinsurance fee will be used to fund the transitional reinsurance program that will subsidize non-grandfathered individual market plans (on and off the Exchange) for at least three years, beginning in 2014.

Who pays this fee?

Health insurance issuers will pay on behalf of fully insured coverage, and third-party administrators will pay for self-insured group health plans.

How is the fee calculated?

The fee will be determined on a per-capita basis. HHS will determine a national per-capita contribution rate, which will be announced in future notices on benefit and payment parameters. States cannot change this national contribution rate, though they can collect additional funds.

When will HHS begin collecting the reinsurance fee?

Beginning with the initial payment that is due Jan. 15, 2014, the reinsurance fee will be collected on a quarterly basis.

How will the collected funds be distributed to each state?

The reinsurance fee will be allocated to states based on the residency of the beneficiaries. For example, this means that BCBSM payments of this fee for its members of group health plans that live outside of Michigan will be allocated to those other states’ reinsurance funds.

Are there any types of plans excluded from the reinsurance fee?

The reinsurance fee does not apply to:

  • Medicare 
  • Medicaid 
  • Excepted benefits, such as standalone dental and vision and certain limited or supplemental benefits 
  • Federal and certain state high risk pools 

What is the state’s role in the collection and allocation of this fee?

States with a reinsurance program have the option of collecting reinsurance contributions directly for fully insured covered enrollees, or deferring to HHS to collect this fee. A state is eligible to establish a reinsurance program regardless of whether the state establishes an Exchange.

For 2014 benefit year contributions, states must notify HHS by Dec. 1, 2012, if the state would like to directly collect reinsurance contributions from fully insured plans. For subsequent benefit years, states must notify HHS by Sept. 1 of the calendar year that is two years prior to the benefit year (e.g., Sept. 1, 2013, for the 2015 benefit year).

HHS will collect contribution funds from self-insured plans and third-party administrators on their behalf, whether or not a state elects to establish a reinsurance program.

Depending on whether the state or the federal government directly collects this fee, can the amount of the reinsurance fee change?

Yes. If a state is running its reinsurance program and decides to collect the funds directly, it may determine that additional funds are needed to support the reinsurance payments or to fund the administrative expenses of the reinsurance program, then additional fees may be collected.

If the state is running its own reinsurance program, but has chosen to have HHS collect the reinsurance fees, HHS will only collect additional funds for the state’s reinsurance administrative costs. States would have to separately collect for additional reinsurance payments, if needed.

If HHS is administering the reinsurance program, it will collect funds for the reinsurance program and its administrative costs, but it will not request additional funds for reinsurance payments.

How does a plan become eligible for reinsurance payments?

A health insurance issuer of a non-grandfathered individual market plan becomes eligible for reinsurance payments when its claims costs for an individual enrollee’s covered benefits in a benefit year exceed the attachment point. The attachment point will be reflected in the annual notice of benefit and payment parameters developed by HHS or the state, depending on which entity is operating the reinsurance program.

Where can I find more information?

For more information, please go to the Federal Register 45 CFR Part 153 (PDF).

The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.