Health Care Reform – Reinsurance Program Regulations
May 26, 2010
As mentioned in a previous alert the Patient Protection and Affordable Care Act (PPACA) (signed into law on March 23, 2010) as modified by the Health Care and Education Reconciliation Act of 2010 (“Reconciliation Bill” and combined, “Health Care Act”) mandated the creation of a reimbursement fund in the amount of $5 billion to pay for the Early Retiree Reinsurance Program (“Reinsurance Program”). Under this program, group health plans will be reimbursed 80% of claims between $15,000 (“cost threshold”) and $90,000 (“cost limit”) for pre-Medicare retirees ages 55 to 64. On May 5, 2010, the Department of Health and Human Services (HHS) published interim final regulations for the implementation of this program. The Reinsurance Program is effective June 1, 2010 and ends on January 1, 2014 or earlier, if the $5 billion fund is exhausted prior to that date.
The Reinsurance Program reimburses claims for health benefits (e.g., medical, surgical, hospital and prescription drug costs) for early retirees and their spouses, surviving spouses and dependents in an amount of 80% of the portion of the health benefit cost attributable to the claims that exceed the $15,000 cost threshold but are below the $90,000 cost limit. Although the reinsurance amount to be paid is based solely on claims incurred on or after June 1, 2010, claims incurred in plan years which began prior to, but end after, the Reinsurance Program’s effective date of June 1, 2010, will count toward the $15,000 cost threshold. However, claims incurred before June 1, 2010 which exceed the $15,000 cost threshold are not eligible for reimbursement and do not count toward the $90,000 cost limit.
Both self-funded and insured plans can participate, including plans sponsored by private entities, state and local governments, nonprofit organizations and unions. Employers and union-based plans who wish to participate in the Reinsurance Program must submit an application requesting certification under the program. Only certified sponsors are allowed to submit a reimbursement request or appeal a reimbursement determination.
As part of the application for certification, plan sponsors are required to certify that the plan has programs in place which are intended to reduce costs related to high cost or chronic health conditions. Applicants must also project reimbursement requests for a two year period, and must certify as to the existence of fraud, waste and abuse policies for the plan. Consequently, employers are advised to commence gathering the information required by the application promptly to obtain certification as soon as possible and take maximum advantage of the Reinsurance Program.
Use of Reimbursement
Amounts reimbursed must be used to lower costs for the plan such as by lowering premium costs for an entity or reducing premium contributions, co-payments, deductibles, co-insurance or other out-of-pocket costs for plan participants. However, HHS expects the plan sponsor to continue to provide at least the same level of contribution to support the applicable plan, as it did prior to the Reinsurance Program’s effective date.
The text of the regulations and related information may be found here.