Who Pays for Reinsurance Contributions After a Midyear Funding Change?
Question: Our company sponsors a calendar-year plan, and we changed from a fully insured health plan to a self-insured plan starting on July 1, 2015. We’ve always offered only one coverage option to our eligible employees. How does this change affect the payment of reinsurance program contributions for 2015?
Answer: When the funding arrangement changes midyear, each contributing entity — in other words, the insurer and the self-insured health plan — is responsible for paying part of that year’s reinsurance program contributions. Payments are based on the portion of the year that the covered lives were enrolled in the self-insured and fully insured plans.
Reinsurance contributions fund reinsurance in the individual market for 2014 through 2016. Under the Affordable Care Act, they are generally assessed on health insurers and self-insured group health plans providing major medical coverage. Contributing entities must self-report their enrollment counts and schedule their payments by November 15 using an online form available through the government portal, Pay.gov. The annual contribution rate for 2015 is $44 per covered life.
The annual contribution amount generally is calculated by multiplying the contribution rate by the average number of covered lives during the calendar year. (The average is calculated using enrollment data from a nine-month counting period from January through September.)
However, this becomes more complex if there’s a midyear change in funding mechanisms. If your company offers only one coverage option, and changes from fully insured to self-insured coverage during the calendar year, the insurer of the fully insured plan is responsible for paying a prorated portion of the $44 contribution rate. The payment is based on the portion of the calendar year during which the plan was fully insured — in this case, from January 1, 2015, through June 30, 2015 — multiplied by the average number of covered lives in the fully insured plan during that period.
The self-insured plan is responsible for paying a prorated portion of the $44 contribution rate. The payment is based on the portion of the calendar year during which the plan is self-insured — in this case, from July 1, 2015, through December 31, 2015 — multiplied by the average number of covered lives in the self-insured plan between July 1, 2015, and September 30, 2015.
Several methods are available to insured and self-insured plans for counting covered lives. Generally, a single contributing entity is required to use one counting method for the entire year. But it appears that, in your case, the insurer and the self-insured health plan wouldn’t be required to use the same counting method to determine their respective contributions.
Questions about reinsurance contributions?