The ACA requires health insurance issuers (insurance carriers) and self-funded group health plans to fund a transitional reinsurance program that will be in place from 2014 through 2016. Reinsurance fees are collected by the Department of Health and Human Services (HHS) for each health plan that meets minimum value. The fees are based on your enrollment count for the first nine months of the calendar year, and this count only needs to be submitted once per year by November 15.
Carriers must remit the reinsurance fee for their fully-insured groups, but employers with self-funded plans are responsible for submitting their enrollment counts and funding and paying the reinsurance fee. Additionally, unlike the PCORI fee, health reimbursement arrangements (HRAs) that are integrated with major medical coverage are exempt from paying this fee (although reinsurance fees will be required for the group health plan providing the major medical coverage).
The following methods may be used by self-insured group health plans to calculate the reinsurance fee. The plan must use the same method consistently for the duration of any year, but may use a different method from one plan year to the next.
- Actual Count: Add the total number of covered lives for each day during the first nine months of the plan year and divide that total by the number of days in the nine months.
- Snapshot Count Method: Add the total number of covered lives on a single day (or more than one day) in each of the first three quarters and divide that total by the number of dates on which a count was made. The dates selected should be generally consistent from quarter to quarter.
- Snapshot Factor: In the case of self-only coverage and other than self-only (e.g., family or self-only plus one) coverage, determine the sum of: (1) the number of participants (i.e., employees or retirees) with self-only coverage and (2) the number of participants with other than self-only coverage multiplied by 2.35.
- Form 5500 Method (Annual Return/Report of Employee Benefit Plan for the Most Recent Plan Year):
- For self-only coverage, determine the average number of participants by adding the total number of participants at the beginning of the plan year with the total number of participants at the end of the plan year as reported on the Form 5500 and divide by 2.
- For plans with self-only and other than self-only coverage, the average number of total lives is the sum of total participants covered at the beginning and the end of the plan year, as reported on Form 5500.
Self-funded plan sponsors with more than one self-funded plan (e.g., one for medical and another for pharmacy) may treat them as a single self-funded plan for purposes of this fee to avoid double counting members.
Fee Payment Schedule
The reinsurance fee may be submitted in one payment or in two installments. If submitting as one payment, the full amount is due by January 15, 2017. If paying the $27 per member in two installments for the 2016 calendar year, the first installment of $21.60 goes to reinsurance payments and administrative expenses and is also due January 15. The second installment of $5.40 goes to the U.S. Treasury and is due November 15, 2017. (Reminder for employers who are paying their 2015 reinsurance fee in two installments - the second installment of $11 per member is due no later than November 15, 2016.)
How to Pay
The federal government issued guidance outlining how to submit the annual enrollment count to HHS:
- Use the form on Pay.gov, a web-based application where forms and online payments to government agencies can be submitted.
- Provide basic company and contact information, give the annual enrollment count for the applicable year and upload supporting documentation.
- Pay.gov will auto-calculate the contribution amounts.
- Decide if you want to submit the reinsurance fee in one payment or two installments, and schedule payment date(s).
- Payment will be automatically deducted from the designated account on the dates selected.
- Contact your bank and add Agency Location Code 7505008016 (Company Name = USDEPTHHSCMS) to your list of approved companies for ACH automatic debits. Failure to do this may delay your payment to the government.
- Submit the number of covered lives via Pay.gov by November 15.
Employers can register here to receive training information and notices on this process.