Reinsurance Fee Rules Exempt Certain Self-Funded Group Health Plans

give and take

Matt Dunning

November 26, 2013 – 1:59 pm ET

Proposed rules issued this week would provide certain self-funded group health care plans with relief from the financial burden of one aspect of the health care reform law.Employers that self-insure and self-administer health coverage for their employees will be exempt from having to pay into reform law’s three-year Transitional Reinsurance Program for the 2015 and 2016 plan years, the Department of Health and Human Services said in rules proposed Monday. However, all self-insured plan sponsors — as well as fully-insured employers — will be required to pay into the reinsurance program in 2014.The reinsurance program was designed to generate $25 billion over three years to offset insurers’ added costs as thousands of high-risk individuals purchase health coverage through public exchanges authorized under the Patient Protection and Affordable Care Act.

In March, HHS set employers’ 2014 contribution rate for the reinsurance program at $63 per plan participant.

Under the rules proposed Monday, the 2015 contribution rate would be $44 per plan participant for fully-insured employers and self-insured employers that use third-party administrators.

HHS said it decided against imposing the fee on self-insured, self-administered group health plans in 2015 and 2016 because they do not rely on outside commercial entities “for administration of the core health insurance functions of claims processing and plan enrollment.”

Self-funded plans that use third-party administrators or other external entities only for ancillary support also are exempt from paying the reinsurance fee in 2015 and 2016.The proposed exemption would apply primarily to self-insured, multiemployer health plans, such as those sponsored by labor unions, experts said.

“The exempted population would only represent a very small percentage of corporate employers,” said Richard Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

Too late for 2014

HHS said it could not exempt self-funded, self-administered plans from the reinsurance program for the 2014 plan year, mainly because it would have to increase the already established contribution rates to meet the program’s revenue target for its first year.


“Excluding self-insured, self-administered group health plans from the set of entities that must provide reinsurance contributions for the 2014 benefit year, without raising the rate on other entities, would decrease the funds available for reinsurance payments for that benefit year, and thus upset settled estimates with respect to expected reinsurance payments that were used to establish premiums,” the department said in its proposed rules.

HHS issued the proposal despite Republican efforts in both houses of Congress to nullify provisions exempting self-insured, self-administered group health plans from the reinsurance program.

A bill introduced in the Senate last week would bar federal regulators from exempting any employers from the reinsurance program without congressional approval.

Earlier this month, Republicans in the U.S. House introduced legislation that would repeal the reinsurance program in its entirety.

Major medical

The rules proposed Monday also provided employers with additional clarity on the department’s definition of “major medical coverage” under existing rules outlining the types of group health plans that are required to contribute to the reinsurance program.Under the proposed rules, the reinsurance fee will apply to health care plans that cover “a broad range of services and treatments in various settings” that meet the minimum value standard, or plans that cover at least 60% of the total cost of medical services, under the health care reform law.


“That’s helpful for employers in terms of determining whether their employee assistance programs, wellness programs are actually exempt from the reinsurance fee,” Mr. Stover said. “The 60% provision provides a very clear line for employers in terms of which benefits are going to be subject to the fee and which aren’t.”