Under the Affordable Care Act (ACA), employers have a reporting requirement for the transitional reinsurance fee. Self-insured group health plans are required to submit their annual enrollment count of covered lives participating in the plan to the US Department of Health and Human Services (HHS) by Nov. 15, 2014. For employers with fully insured plans, their insurance company should inform them when their covered life counts are due so the carrier can pay the fee.
Reporting and payment of the fee must be done online at www.pay.gov. Employers will need to submit company and contact information, the annual enrollment count for the applicable year, and other supporting documentation. The online form will automatically calculate the fee. The employer may choose whether to make a one-time payment or pay in installments.
Between 2014 and 2016, the ACA requires all health insurance issuers (including self-insured employers) and third-party administrators to contribute toward a transitional reinsurance program to help stabilize premiums for individual health coverage. The fee, estimated for 2014 to be approximately $63 per covered life, will be tax deductible. It will be assessed on a calendar-year basis, regardless of the plan year. As an example, a self-insured employer with 1,000 covered lives will pay a $63,000 transitional reinsurance fee for 2014.
Beginning in 2014, certain health insurance issuers in the individual and small-employer markets will become subject to new restrictions on how they price health insurance as well as the conditions under which they will provide the insurance. These additional risks could cause some insurers to cover higher-risk populations which could adversely affect an insurer’s financial situation. On account of this development, the ACA includes a provision for “temporary reinsurance payments” to the insurers who will cover these higher-risk populations.
This fee applies to plans that provide major medical coverage, but not to stand-alone vision and dental plans. Insurance companies will be responsible for paying the fee for fully insured plans and are expected to pass this cost through in the form of increased premiums. Self-insured plans will pay the fee with plan assets.
For more information on this topic, or to learn how Baker Tilly tax specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax advice, if any, contained in this communication was not intended or written to be used by any taxpayer for the purpose of avoiding penalties.