Affordable Care Act, Guidance to 2015 Changes

( Marc Altneu is a local Health Insurance Broker/Consultant. For further information email him at marc@mcmagency.com )

The Department of Health and Human Services (“HHS”)

recently issued proposed regulations addressing a number of

provisions under the Affordable Care Act (“ACA”). Some of this

guidance will impact employer-sponsored group health plans.

Transitional Reinsurance Fee

The regulations estimate that the transitional reinsurance

fee for 2015 will be $44 per covered life. This is a reduction

from the $63 per covered life fee that applies for 2014. The

transitional reinsurance fee for 2016 has not been announced.

As a reminder, the fee is assessed on all covered lives (e.g.,

any employee, spouse, domestic partner, children, and

COBRA beneficiaries). Contributing entities must pay the

reinsurance fee. Contributing entities are:

• A health insurance issuer (carrier) for insured coverage;

• For 2014, a self-insured group health plan whether or not

it uses a third party administrator; and

• For 2015 and 2016 benefit years, a self-insured group

health plan that uses a third party administrator in

connection with claims processing, adjudication

(including management of appeals), or plan enrollment.

This is a notable change from the 2014 requirements, as

self-insured, self-administered major medical plans will

be exempt from the transitional reinsurance fee for 2015

and 2016 (but not 2014). Most employer-sponsored selfinsured

health plans are administered by a third party and

will not qualify for this relief.

A self-insured group health plan that is a contributing entity

is responsible for the reinsurance contributions, although it

may elect to use a third party administrator for transfer of the

reinsurance contributions.

In addition, the proposed rule modifies the previously

announced payment scheme. Now, contributing entities must

pay the fee in two installments. This is a departure from the

previously announced payment model in which a single lumpsum

payment was due. However, HHS is considering whether

to allow a single lump-sum payment option.

For now, the two-payment installment means:

• For the 2014 benefit year ($63 per covered life fee),

entities will pay $52.50 per covered life within 30 days

after the date of first notification by HHS (expected in

the fourth quarter 2014) and the remaining $10.50 per

covered life will be invoiced by the fourth quarter of 2015

and payable in late fourth quarter 2015.

• For the 2015 benefit year ($44 per covered life proposed

fee), entities will pay $33 per covered life within 30 days

after the date of first notification by HHS (expected in the

fourth quarter of 2015) and the remaining $11 per covered

life fee will be invoiced by the fourth quarter of 2016 and

payable late in the fourth quarter of 2016.

Further, the new regulations clarified that the transitional

reinsurance fee applies to “major medical coverage,” which

is newly defined for these purposes as health coverage for

services and treatments provided in various settings that

provides a minimum value, using the same criteria applicable

to the employer penalty. So, to the extent that the plan’s share

of the total allowed cost of benefits is at least 60%, which is

calculated on a broad set of services using an HHS-issued

minimum value calculator, a yet to be issued design-based

safe harbor checklist, or actuarial certification, the transitional

reinsurance fee will apply for that plan.

The proposed rule clarifies that no reinsurance contributions

will be required in the case of employer-provided group health

plan coverage where such coverage:

• applies to individuals who are also enrolled in individual

market health insurance for which reinsurance

contributions are required; or

• is supplemental or secondary to group health coverage

for which reinsurance contributions must be made for the

same covered lives.

Finally, the guidance makes clear that reinsurance

contributions are not owed by the carrier or self-insured plan

on individuals with primary residence in a territory that does

not operate a reinsurance program.

Maximum Annual Limitation on

Cost-Sharing

All non-grandfathered group health plans must comply with

annual cost-sharing limitations on out-of-pocket maximums.

The dollar amounts are adjusted annually. For 2015, the

maximum annual limitation on cost-sharing will be $6,750 for

self-only coverage and $13,500 for family coverage (coverage

other than self-only).

Maximum Annual Limitation on Deductibles

– Small Group

Non-grandfathered insured small group health plans are

subject to certain deductible limits that are adjusted annually.

A “small” employer is an employer that employed an average

of not more than 100 employees on business days during

the preceding calendar year and who employs at least 1

employee on the first day of the plan year. For plan years

beginning before January 1, 2016, a state may elect to

substitute “50” for “100.” All states currently define the small

group health insurance market as employers with 2-50

employees, with the exception of WA, CO, HI, MS, FL, NC,

DE, CT, RI, MA, NH, ME, and VT that use the definition of

employers with 1-50 employees. This may change prior to

January 1, 2016.

For 2015, the annual deductible in the small group market

may not exceed $2,150 for self-only coverage and $4,300 for

family coverage (coverage other than self-only).

Composite Rating – Small Group

HHS restated that nothing prevents an issuer from converting

per-member rates into average enrollee premium amounts

(calculated composite premiums), provided that the total

group premium is the same total amount calculated using

the permitted rating factors per member. Insurance carriers

are subject to new underwriting rules with respect to small,

insured groups. Rating variations are restricted to (a) benefit

coverage elected (plan and tier), (b) geographic area, (c) age

(limited to a ratio of 3 to 1 for adults), and (d) tobacco use

(limited to a ratio of 1.5 to 1).

Composite premiums are average rates for a particular group

of participants. Therefore, any change in employee census

would result in a change in the average rate. To address the

mid-year composite premium fluctuations, HHS proposed

a new policy for plan years beginning on or after January

1, 2015. The policy requires issuers that offer a composite

premium for small groups to ensure that the amount does

not vary for any plan participant during the plan year. The

issuer is required to accept the group’s composite premium,

calculated at the beginning of the plan year, for any new

participant who enrolls during the plan year. Issuers are

encouraged to adopt this policy for plan years beginning in

2014.

HHS is considering a uniform tiered-composite rating

structure for the small group market for future years.

Risk Adjustment Fee – Small Groups

Beginning January 1, 2014, there is a new permanent fee

imposed on health insurance carriers with respect to small,

insured, non-grandfathered plans. For calendar year 2014,

HHS established a per capita annual user fee rate of $0.96,

which will apply as a risk adjusted user fee of $0.08 per

enrollee per month. HHS proposed for calendar year 2015 an

increased per capita fee rate of $1.00 risk adjusted user fee

per enrollee per year.

Exchange Marketplace Open Enrollment

HHS proposes changing the annual open enrollment period

for the 2015 benefit year to begin on November 15, 2014 and

extend through January 15, 2015