How to Prepare for ACA Transitional Reinsurance Costs

Employer and other plan sponsors should start working now with their insurers, administrators and advisors to understand the implications of and their options for addressing the "Transitional Reinsurance Program" and other new Patient Protection & Affordable Care Act (ACA)-associated cost and plan design changes  so that they are prepared to finalize and implement their health plan design, contracts and arrangements in time to meet the accelerated deadlines for notifying participants of plan changes and otherwise implement their plan changes for the upcoming plan year. The impending imposition of  Transitional Reinsurance Program assessments are only one of a myriad of new and pre-existing federal health plan rules and associated market changes impacting the design of employer and union-sponsored health plans.  Since ACA now also requires 60 days advance written notice of material health plan changes, .  When making these decisions, employer and other health plan sponsors and their advisors, administrators and insurers  should not only focus on the technically new mandates but also the allocation of fiduciary and other responsibilities, liabilities and other plan and services agreements terms.  Plan sponsors and their fiduciaries historically have underappreciated the significance of these allocations or presumed that their vendor contracts allocate responsibility to the service providers and vendors to match the sales pitch.  Always rarely the case, the changes in the marketplace and the law make it even more likely that sponsoring employers and their leaders of even plans that carefully reviewed and negotiated these responsibilities in their past contracts need to carefully look at these plan and contractual terms carefully. The Transitional Reinsurance Program is one of a series of new ACA-imposed assessments that can impact the plan design and costs.    Proper understanding of these rules is critical for plan sponsors and their fiduciaries to ensure that they don't unintentionally assume significantly greater liability for their self-insured health plans in an attempt to design around a relatively small by comparison ACA assessment. Section 1341 of the Patient Protection & Affordable Care Act (ACA) requires the establishment of the reinsurance program to provide for stabilization of funding for exchanges.  Funding for the costs of the program is accomplished through amounts assessed upon insurers and self-insured plan third party administrators.  ACA § 1341 accomplishes this by providing for:

• The establishment for each State of a transitional reinsurance program stabilize premiums for coverage in the individual market from 2014 through 2016;
• Requiring all health insurance issuers and third party administrators on behalf of self-insured group health plans, to pay contributions to support reinsurance payments that cover high-cost individuals in non-grandfathered plans in the individual market.

Registration is now open for a series of webinars that the Department of Health & Human Services will host on "The Transitional Reinsurance Program: Contributing Entities and Counting Methods" on July 14, July 18 and July 23, 2014 from 2:00 p.m. - 3:30 p.m. EST.  The upcoming HHS webinars will cover the same information.  They will focus on reinsurance contributions including who is a contributing entity and how a contributing entity can calculate its annual enrollment count to determine reinsurance contribution amounts. The intended audience for this webinar is health insurance issuers, self-insured group health plans, third party administrators (TPAs) and administrative services-only (ASO) contractors.  To register for the HHS webinar and to obtain additional information see here. Understanding how the Transitional Reinsurance Program assessments will be calculated is one of many critical steps in making plan design changes.  When considering whether to take advantage of options for minimizing these assessments, however, employer, union and other plan sponsors need to consider whether the liability and other consequences of meeting requirements for avoidance of the assessments is warranted by the anticipated savings.  With superficially it might seem desirable to avoid the payment of a few dollars per covered lives associated with the assessment, employers and other sponsoring organizations and the officers or other leadership employees involved in plan design or administration should critically review the effect of meeting these requirements specifically, as well as their proposed vendor contracts and associated plan documents and communications on their personal and organizations' fiduciary and other liabilities.  To the extent that existing or expanded fiduciary liability cannot be avoided, it will be critical that the sponsor and its leadership ensure that proper steps are taken to select, credential, bond, and appoint the persons who will be or help carry out fiduciary or other plan-related responsibilities.  Additionally, most plan sponsors will want to consider exploring the availability of fiduciary liability insurance coverage to help mitigate the potential liability risks associated with plan sponsorship.