New HHS rule could exempt your client from ACA reinsurance fee

Self-Insured Multiemployer Health Plans Could Be Exempt From ACA Reinsurance Fee In 2015 And 2016

The Department of Health and Human Services issued a final rule March 5 on the reinsurance fee imposed under the Affordable Care Act. The reinsurance fee is imposed on group health plans. If the plan is insured, the insurer pays the fee, and if the plan is self-insured, the plan itself pays the fee. The reinsurance fee applies in 2014, 2015 and 2016. It equals the yearly rate times the number of individuals covered by the plan, with the yearly rate being $63 for 2014, $44 for 2015 and to be announced for 2016.

Multiemployer health plans are subject to the reinsurance fee. The final rule does not provide any relief for these plans for 2014. However, for 2015 and 2016, the final rule exempts from the fee any multiemployer plan which is both self-funded and self-administered. It is easy to determine whether the plan is self-funded. The key question is whether the plan is self-administered.

The final rule says the following on whether the plan is self-administered:

To be self-administered, the plan must retain responsibility for claims payment, claims adjudication (including internal appeals), and enrollment (such functions being the "core functions"). Thus, if the plan uses a third party for these functions, it would not be treated as self-administered for these purposes.

As exceptions, the plan does not fail to be treated as self-administered merely because it-

(1)   Outsources core functions to an unrelated third party, provided that the underlying benefits are pharmacy benefits or ACA-excepted benefits.

(2)   Outsources a de minimis amount of its activity, even if core functions, for non-pharmacy or non-ACA-excepted benefits to a third party administrator (a "de minimis amount" means up to 5%, as measured generally by the number or cost of enrollment or claims processing transactions for non-pharmacy and non-ACA-excepted benefits which are outsourced).

(3)   “Leases" a network from an unrelated third party and also obtains provider network development, claims repricing, and similar services.

(4)   It uses a service provider that is affiliated with the plan, other than with an employer that contributes to the plan (admittedly this exception (4) is less than clear). 

Stanley D. Baum is a New York ERISA attorney at Carey Kane LLP, handling matters in ERISA, employee benefits, health and disability and employment law for individuals and unions. He can be reached at (212) 868-6300 or SBaum@carykanelaw.com.

The information in this Legal Alert is for educational purposes only and should not be taken as specific legal advice.