The Department of Health and Human Services (HHS) has issued final regulations on the transitional reinsurance fee and 2015 out-of-pocket limits. The transitional reinsurance fee will drop from $63 per covered life for 2014 to $44 per covered life for 2015, with the fee for 2016 expected to be even lower.1 Out-of-pocket limits for 2015 will be $6,600 for individual coverage and $13,200 for family coverage — lower than the limits proposed in December 2013.
Self-insured health plans and insured plans must pay the transitional reinsurance fee for each individual covered under major medical coverage, as required by the Patient Protection and Affordable Care Act (PPACA).
Transitional reinsurance fee
The transitional reinsurance fee is levied for 2014, 2015 and 2016. The fee is slated to fund a temporary reinsurance pool that encourages insurers to participate in public exchanges and pay administrative costs for the Early Retiree Reinsurance Program (ERRP).
The final regulation confirms that the transitional reinsurance fee will be collected in two parts each year. For the 2014 fee of $63 per covered life, the first installment of $52.50 per life will be due in January 2015 and the second of $10.50 per life will be due in late 2015. The schedule will be the same for the 2015 fee. The first installment covers reinsurance payments and administrative expenses, while the second part covers Treasury’s administrative costs for the ERRP.
Insurers are responsible for making the reinsurance fee payments on insured coverage. Self-insured group health plans are responsible for the fee but may direct a third-party administrator (TPA) or administrative services only (ASO) contractor to pay the fee on the plan’s behalf.
Self-insured plans and insurers should report to HHS the number of covered lives enrolled in major medical coverage by November 15. Major medical coverage is defined as health coverage for a broad range of services and treatments, including diagnostic and preventive services, as well as medical and surgical conditions in inpatient, outpatient and emergency room settings.
HHS will notify self-insured plans and insurers of the fee amounts, and payment will be due in 30 days.
Self-insured health plans may use one of the following methods to determine the number of covered lives under their major medical coverage:
- An actual count of the number of covered lives over the first three quarters of the year.
- A snapshot count, which totals the number of lives covered on representative dates in each of the first three quarters of the year. That total is then divided by the number of dates on which a count was made. The same months must be used for each quarter (for example, the first month in the quarter), and the date used for the second and third quarters must fall within the same week of the quarter as the corresponding date for the first quarter.
- The snapshot factor method, which starts the same way as the snapshot count. But when dividing the total by the number of dates on which a count was made, the number of lives covered on a date is calculated by multiplying the number of employees with family coverage by 2.35 and then adding it to the number of employees with self-only coverage.
- The Form 5500 method, which obtains the number of lives covered from the most recently filed Form 5500. For a plan offering only individual coverage, the number of covered lives is the sum of total participants covered at the beginning and end of the plan year reported on Form 5500, divided by two. For a plan that also offers family coverage, covered lives equal the sum of total participants covered at the beginning and the end of the plan year on Form 5500.
The final rule retains a controversial exemption from the fee for plans that are self-insured and self-administered for 2015 and 2016. While making no direct reference to multiemployer Taft-Hartley plans, the exception is widely perceived as fashioning a benefit for such plans, although a self-insured, self-administered plan need not be collectively bargained to qualify for the exception.
2015 Out-of-pocket limits for group health plans
The annual limit on out-of-pocket expenses under all non-grandfathered group health plans takes effect for the 2014 plan year. The limit applies to deductibles, coinsurance, copayments and similar charges for essential health benefits but not to premiums, balance billing amounts for non-network providers or non-covered services. Plans and insurers may divide the limit across multiple categories of benefits as long as the combined amounts remain within the maximums.
The 2014 out-of-pocket limit is $6,350 for self-only coverage and $12,700 for family coverage (the same as the out-of-pocket maximum for a health-savings-account (HSA)-eligible high-deductible health plan (HDHP) in 2014). But HDHPs are indexed to the consumer price index, and beginning with the 2015 plan year, the out-of-pocket limit will be linked to the cost of employer-provided health coverage as reported in the National Health Expenditure Survey. For the 2015 plan year, the out-of-pocket limit will be $6,600 for self-only coverage and $13,200 for family coverage. HHS also clarifies that in 2015 and beyond, the HDHP out-of-pocket limit will continue to apply to HSA-eligible HDHPs, while non-HDHP group health plans will be subject to the PPACA limit.
HHS announced that open enrollment in the public exchanges for the 2015 benefit year will begin on November 15, 2014, and extend through February 15, 2015. The later start to the enrollment period is designed to give insurers additional time to set their 2015 rates.
Roughly half the states have declined to operate their own public exchange, and states that change their minds have until June 15 (instead of January 1) to have an approved or conditionally approved blueprint in place for the following year.
The final regulation also addresses public exchange operations, including the premium stabilization program, consumer protections, financial oversight and the Small Business Health Options Program (SHOP). Finally, HHS has updated for 2015 the actuarial value (AV) calculator that is used by insurers planning to offer insured coverage on public exchanges in 2015.
Employers should consider which method of counting covered lives would help to hold down the transitional reinsurance fee expense. Self-insured employers should explore with their vendors whether they or the vendor will report covered lives and pay the fee.