Health Care Reform at a Glance

Health care reform at-a-glance

Affordable Care Act (ACA) Reinsurance Fee

The Affordable Care Act (ACA or health care reform law) provides that each state create a transitional reinsurance program during the first three years (2014-2016) of the exchange’s operation. If a state does not create a reinsurance program, HHS will operate the reinsurance program in that state.

The program aims to help stabilize premiums for coverage in the individual market and lower the effects of adverse selection. This is done by giving reinsurance payments to issuers that sign up high-cost individuals in non-grandfathered individual market plans.

Reinsurance contributions and payments

As stated by the Department of Health and Human Services (HHS), the reinsurance program requires health insurers and third-party administrators (TPAs) to make contributions to the reinsurance program to reinsure individual market insurers who cover people with expensive claims. The contributions are required for both fully insured and self-funded plans. The group market is required to make these contributions, but will not receive payments under the reinsurance program. Reinsurance payments are only provided to individual market insurers who insure high claimants in non-grandfathered plans. A

recent notice proposes that HHS collect all contributions under a national rate, estimated to be a fee of $5.25 per member per month in 2014.* The fee will be included in monthly billing statements for fully insured plans.

*This is an estimated amount and may be subject to change; amount may vary by state.

 

Attachment point – the annual threshold dollar amount per individual claimant of claims’ costs paid after which an issuer can take reinsurance payments ($60,000)

 

Reinsurance cap – the payment limit per individual claimant when an issuer can no longer get reinsurance payments ($250,000)

Coinsurance rate – the share of an issuer’s claims costs that are above an attachment point and below a reinsurance cap for the benefit year (80%)

Those three factors are decided by HHS or by the state with HHS approval. Any payments to issuers will depend on high claimants from their individual market enrollees.

State-operated versus HHS-operated transitional reinsurance programs

final rule published by the HHS March 23, 2012 says that states can choose to either:

Launch their own transitional reinsurance program, or

Have HHS create the program on their behalf, whether or not they set up a state-run exchange. States that decide to run their own program will be responsible for all reinsurance payment functions.

If HHS runs the transitional reinsurance program, it will also handle the reinsurance payments. A

recent HHS bulletin states that it is deciding how reinsurance payments will be identified, calculated and given to individual market issuers by HHS-operated programs.

The table below has key dates related to HHS-operated reinsurance program.

Key dates for HHS-operated reinsurance programs

Questions and answers

Q. Who determines how much the ACA Reinsurance Fee will be and how is it calculated?

A. The ACA Reinsurance Fee rates can vary by state, but should be the same for all health insurers and TPAs in that state. The fee we are currently quoting is based on preliminary information provided by HHS. The states must publish final benefit and payment parameters by March 1 of each year for the following year.

Q. Is there any way to reduce or eliminate the ACA Reinsurance Fee?

A. The ACA Reinsurance Fee is part of a temporary program which will decline for three years and then be eliminated.

Q. What is the anticipated impact of this fee?

A. There is an anticipated impact to health insurance rates in 2014.

Q. What type of rate impact is expected?

A. The most significant changes to rates due the ACA Reinsurance Fee and all other health care reform provisions in 2014 will be in markets for individuals and small employers, where the rating constraints, product constraints, new benefit mandates and new taxes will have the biggest impact. The impact will vary significantly between each individual and each small employer.

Q. What type of analysis has been done on the expected impact of all the health care reform provisions?

A. Examples of analyses that show the range of impact include the following:

A report, led by former CBO Director, Doug Holtz-Eakin of the American Action Forum, looked at the specific impacts of the ACA reforms taking place in 2014 and how premiums may be affected. The survey found:

On average, premiums for young, healthy people in the individual and small group market would jump 169 percent

Costs for older, less healthy people in the individual and small groups markets would decrease by an average of 22 percent

A study by the actuarial firm Milliman in Ohio that shows the range of changes expected for small employers will range from a decrease of 25 percent to an increase of 130 percent

In Indiana, Milliman found that the increase in premiums in the individual market beginning in 2014 could range from 75 percent to 95 percent, and rates for others would decrease

Other studies conducted by Dr. Jonathan Gruber of MIT in Maine, Wisconsin, Minnesota, and Colorado found that premium impacts in the individual market may increase as much as 85 percent and increases in the small group premiums may increase more than 20 percent

This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.

Anthem Blue Cross and Blue Shield is the trade name of: In Colorado: Rocky Mountain Hospital and Medical Service, Inc. HMO products underwritten by HMO Colorado, Inc. In Connecticut: Anthem Health Plans, Inc. In Georgia: Blue Cross and Blue Shield of Georgia, Inc. In Indiana: Anthem Insurance Companies, Inc. In Kentucky: Anthem Health Plans of Kentucky, Inc. In Maine: Anthem Health Plans of Maine, Inc. In Missouri (excluding 30 counties in the Kansas City area): RightCHOICE® Managed Care, Inc. (RIT), Healthy Alliance® Life Insurance Company (HALIC), and HMO Missouri, Inc. RIT and certain affiliates administer non-HMO benefits underwritten by HALIC and HMO benefits underwritten by HMO Missouri, Inc. RIT and certain affiliates only provide administrative services for self-funded plans and do not underwrite benefits. In Nevada: Rocky Mountain Hospital and Medical Service, Inc. HMO products underwritten by HMO Colorado, Inc., dba HMO Nevada. In New Hampshire: Anthem Health Plans of New Hampshire, Inc. In Ohio: Community Insurance Company. In Virginia: Anthem Health Plans of Virginia, Inc. trades as Anthem Blue Cross and Blue Shield in Virginia, and its service area is all of Virginia except for the City of Fairfax, the Town of Vienna, and the area east of State Route 123. In Wisconsin: Blue Cross Blue Shield of Wisconsin (BCBSWi), which underwrites or administers the PPO and indemnity policies; Compcare Health Services Insurance Corporation (Compcare), which underwrites or administers the HMO policies; and Compcare and BCBSWi collectively, which underwrite or administer the POS policies. Independent licensees of the Blue Cross and Blue Shield Association. ® ANTHEM is a registered trademark of Anthem Insurance Companies, Inc. The Blue Cross and Blue Shield names and symbols are registered marks of the Blue Cross and Blue Shield Association.

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