ACA Transitional Reinsurance Program Summary

The Affordable Care Act (ACA) creates a transitional reinsurance program to help stabilize premiums for coverage in the individual market from 2014 through 2016. ‘Contributing entities’ (either health insurance companies or sponsors of self-funded plans) are required to make reinsurance payments annually for ‘major medical coverage’.  Payments are calculated by multiplying the average number of covered lives during the benefit year by the contribution rate for the applicable year.

For the purpose of employer-sponsored group health plans, the reinsurance contribution is required for major medical plans that provide “minimum value”. Minimum value is generally defined as a plan that has an actuarial value of at least 60%.

Amount and Timing of Reinsurance Contribution

Each year HHS will publish the national per capita contribution rate.

  • 2014 benefit year contribution = $63 per participant
  • 2015 benefit year contribution = $44 per participant
  • 2016 benefit year contribution = TBD

Paying the Fee

For the 2014 benefit year, payment is due by January 15, 2015. The employer must arrange for an ACH draft to make the payment. An ACH draft is the only method allowed to make the payment.

Employers may choose to pay the entire $63.00 per covered life contribution in a single payment by the first deadline, or can choose to pay the fee in two installments. If two installments are chosen, the first installment of $52.50 per covered life is due by January 15, 2015. The balance of $10.50 per covered life must be paid no later than November 15, 2015.

Membership Counting Methods

The count must be determined using one of four specified methods described below. When using the actual count or the snapshot method for calculating the membership for the reinsurance fee, the employer must use the plan’s membership during the first three quarters of the calendar year, regardless of the plan year.  If the 5500 method is used, the employer must use the participant count reported on the most recently filed Form 5500.

  • Actual Count Method – calculate the sum of lives covered for each day from January 1 – September 30 and divide by the number of days in the period.
  • Form 5500 Method – use the number of “5500 participants” actually reported on the Form 5500 for the plan year. Total number of lives is determined by adding the total participant counts at the beginning and end of the year.
    • A participant for 5500 purposes includes only the principal “subscriber” (i.e. employee or COBRA participant), not the dependents.
    • Only employers who actually file a Form 5500 may use this method.
  • Snapshot Method – add the total number of lives covered on any date (or more dates if an equal number of dates are used for each quarter) during the same corresponding month in each quarter, and divide that total by the number of dates on which a count was made.
  • Snapshot Factor Method – same as the snapshot method except that the number of lives covered on a date is calculated by adding the number of participants with self-only coverage to the product of the number of participants with coverage other than self-only coverage times a factor of 2.35.

CMS has provided a webpage with TRP details at http://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/The-Transitional-Reinsurance-Program/Reinsurance-Contributions.html.