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Proposed Rules Clarify Health Plan Liability for Reinsurance Program Contributions
Practical Law Legal Update 0-532-2608 (Approx. 4 pages)
Proposed Rules Clarify Health Plan Liability for Reinsurance Program Contributions
by PLC Employee Benefits & Executive Compensation
| Published on 17 Jun 2013 • USA (National/Federal) |
On June 14, 2013, the Department of Health and Human Services (HHS) issued additional proposed regulations addressing various aspects of the health insurance exchanges under the Affordable Care Act (ACA). The proposed regulations address, among other things, group health plan and insurer standards related to the ACA's transitional reinsurance program.
On June 14, 2013, HHS issued proposed regulations addressing various aspects of the health insurance exchanges (HIX) under the Affordable Care Act (ACA), including the transitional reinsurance program. Other issues covered under the proposed regulations include:
- Health insurer standards for the ACA's risk corridors program.
- Additional rules governing the roles of agents and brokers for HIX-related functions (for example, helping individuals apply for advance premium tax credit payments (see Practice Note, Health Insurance Exchanges and Related Requirements under the ACA).
- HIX-specific privacy and security requirements.
- Functions involving the Small Business Health Options Program (SHOP).
Contributing Entities under Transitional Reinsurance Program
The ACA requires that a transitional reinsurance program be established in each state to help stabilize premiums for coverage in the individual market during the first three years of HIX operation (2014 through 2016). Health insurers and group health plans must make contributions to the reinsurance program (see Legal Updates, Final Rules on Reinsurance, Risk Adjustment and Risk Corridor Programs and Proposed HHS and OPM Regulations Address Exchanges, Transitional Reinsurance Programs, Multi-state Plans and More).
The proposed regulations amend the definition of who is a "contributing entity" for purposes of the reinsurance program. The term was already defined to include:
- Health insurers.
- Self-insured group health plans, which can use third-party administrators or administrative services only contractors to manage the transfer of reinsurance contributions.
The current contributing entity definition does not address group health plan benefits that are partially insured and self-insured. This could occur, for example, where:
- Medical benefits are provided under a self-insured arrangement.
- Prescription drug benefits are provided under an insured arrangement.
The proposed regulations would amend the definition of contributing entity to clarify that a self-insured health plan includes a group health plan that is partially insured and self-insured, but only if the insured coverage is not major medical coverage (regardless of whether the self-insured coverage is major medical coverage). Therefore, under the amended definition:
- If a group health plan meets the definition, then the group health plan is liable for reinsurance contributions under HHS counting rules for self-insured group health plans.
- The insurer is liable for reinsurance contributions where the insured coverage is major medical coverage.
Reinsurance Contributions and Multiple Policies
If group health plan coverage is a combination of self-insured and insured coverage, liability for reinsurance contributions falls on the self-insured plan. However, the proposed regulations also include an amendment addressing liability for reinsurance program contributions in which:
- An insured group health plan provides benefits to the same covered individuals through more than one policy.
- The policies, standing alone, do not constitute major medical benefits, though the total benefits do.
This could occur, for example, in a group health plan arrangement:
- Consisting of two policies with different insurers, with:
- one policy providing hospitalization benefits; and
- the other policy providing benefits for outpatient treatments and prescription drugs.
- In which the same individuals are simultaneously enrolled in both policies.
For such an arrangement, it was unclear whether:
- The policies' insurers would be required to make reinsurance contributions for the policies, since neither policy, individually, constituted major medical coverage.
- The group health plan would be required to make reinsurance contributions because it would not be a self-insured plan.
To address this type of arrangement, the proposed regulations provide that a health insurer of group health plan coverage would make reinsurance contributions for individuals under the coverage, including coverage that does not constitute major medical coverage, if:
- The group health plan provides the coverage for the same covered individuals through more than one insurance policy that, in combination, constitute major medical coverage (but individually do not).
- The individuals are not covered by the group health plan's self-insured coverage, except for self-insured coverage limited to excepted benefits.
- Policy coverage offered by the insurer is a greater percentage of the total health insurance coverage offered in combination by the group health plan than the percentage offered under any of the other policies.
In the preamble to the proposed regulations, HHS acknowledges that an insurer of group health coverage that does not, by itself, constitute major medical coverage may not know if the employer/plan sponsor has obtained group health plan coverage for the same individuals. As a result, HHS is considering a rule that would require such an insurer to request a representation from the employer addressing the relative percentages of coverage offered by the insurer.
Practical Impact
The clarifications in these proposed regulations answer a number of HIX-related questions in advance of 2014, when qualified individuals and employers can be covered under the exchanges. An additional proposal would address reinsurance contributions for group health plans in which some benefit options are insured but others are not. Under the proposal, if a benefit option:
- Is insured by an insurer, then the insurer would be responsible for the related reinsurance contribution.
- Is not insured (for example, where the plan itself assumes the risk of providing the coverage), the plan would be responsible for the related reinsurance contribution.
HHS seeks comments on this and other aspects of the proposed regulations.