A provision in the Patient Protection and Affordable Care Act (Affordable Care Act) that establishes a reinsurance program for health insurance plans in the state health care Exchanges is expected to have a financial impact on employer health care costs beginning in 2014 and extending through 2016.
Under the Affordable Care Act, each state must establish a transitional reinsurance program to help stabilize premiums for coverage in connection with its health care Exchange program. If a state chooses not to establish a transitional reinsurance program or a risk adjustment program, the Department of Health and Human Services (HHS) will do so on the state's behalf. The government will fund the reinsurance program through a reinsurance fee on health insurance issuers and third-party administrators of self-insured group health plans, which Aon Hewitt expects will be passed on to employer plan sponsors. Gross fees on a national basis are expected to total $12 billion for 2014, $8 billion for 2015, and $5 billion for 2016.
Details on the fees, such as the amount of the fees and how they are paid, are not expected until later this year. The current understanding is that the fee will be imposed on all group health plans, including stand-alone retiree medical plans, for each enrollee in the plan—employees/retirees, spouses, and dependents. However, guidance to date indicates that it would not apply to plans that consist solely of "excepted benefits," including limited excepted dental and vision plans. While the methodology pertaining to the amount of the fee has not yet been issued, the fee could be between $60 and $80 per capita on an annual basis in 2014.
Aon Hewitt is monitoring this situation and will provide additional guidance as it becomes available.
If you have any questions, please contact your local Aon Hewitt H&B Legal Consultant or Actuarial Consultant.
Click here to read the final rule on standards related to reinsurance, risk corridors, and risk adjustment.
Click here to read the "Bulletin on the Transitional Reinsurance Program: Proposed Payment Operations by the Department of Health and Human Services."