Transitional Reinsurance Contributions Q&A

Under the Affordable Care Act (ACA), health insurance issuers and self-funded group health plans are required to make contributions to create funds for transitional non-profit reinsurance entities that will help offset the costs of high-risk individuals in the individual market. The reinsurance contributions (RC) will be in effect from January 1, 2014 through December 31, 2016.  The RC applies to both insured and self-funded plans.

What are the roles of non-profit reinsurance entities?

Non-profit reinsurance entities are being created to help stabilize premiums for coverage in the individual market in a state during the first three years of operating an insurance exchange when the risk of adverse selection, because of new rating rules and market exchanges, is the greatest.  The reinsurance entity will be required to collect payments and use the amounts collected to make reinsurance payments to health insurance issuers that cover high-risk individuals for the three-year period, January 1, 2014 through December 31, 2016.

What is the contribution?

The ACA expresses the amount of the overall industry contribution in aggregate.  According to the most recent guidance, the contribution is to be collected over the three-year period in the amounts of $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. Per the final rule issued in March 2013, the contribution amount will be expressed as a per capita rate.

Who is responsible for paying the assessment?

Each self-funded group health plan is responsible for funding and remitting the contribution to the federal government.  A self-funded plan can request a third-party administrator (TPA, such as Aetna), to remit the contribution on their behalf. Contributions owed to the U.S. Department of Health and Human Services will be collected on an annual basis.

How will the reinsurance contribution impact self-funded plans?

The national contribution payment for 2014 will be $63 per member per year or $5.25 per member per month.  Self-funded group health plans will remit payment based on the per capita rate applied to their average membership for the first nine months, beginning with the 2014 calendar year.

The contribution is due in one annual payment; the first payment will be due in December 2014 or January 2015.