The Department of Health and Human Services (HHS) has announced that the 2014 deadline for reporting the number of participants covered under a health plan for purposes of paying the 2014 Transitional Reinsurance Fee has been extended from November 15, 2014 to December 5, 2014. Insurers and sponsors of self-insured plans who have not already done so must register and report the number of participants covered under their health plans for 2014 at www.pay.gov.

Reinsurance Program

The Affordable Care Act established a Reinsurance Program to assist with stabilizing health insurance premiums payable for coverage in the individual market during 2014 through 2016. The Reinsurance Program requires health insurance issuers and sponsors of self-insured health plans to pay a Transitional Reinsurance Fee for 2014, 2015 and 2016. The fees collected under the program will be distributed to health insurance issuers in the individual market, which includes the health insurance exchanges established under the Affordable Care Act, to offset the cost of coverage provided to high-cost individuals in the individual market during 2014 through 2016. The payments to the issuers are intended to reduce the insurance risk associated with providing coverage in the individual market to potentially high-cost participants.

Calculation of Fee

The fee is calculated based on the number of covered lives under the health plan (including all employees, spouses and dependents covered under the plan). Regulations issued by the HHS provide alternative methods that can be used for calculating the number of covered lives, depending on whether the plan is insured or self-insured. The methods generally include counting the actual number of individuals covered by the plan for each day during the first nine months of the plan year and dividing the sum by the number of days within the nine month period, taking a snapshot of the number of covered lives on a single day in each quarter and averaging the snapshots, and using amounts reported on Form 5500 adjusted by certain factors to account for self-only versus other coverage. The fee for 2014 is $5.25 per covered life under the plan per month ($63.00 annually per covered life during 2014). The fee will decrease for 2015 and 2016.

The fee only applies to plans providing major medical coverage, including high deductible health plans, COBRA coverage and retiree only medical coverage. The fee is generally not applicable to health reimbursement arrangements, health savings accounts, health care flexible spending accounts, employee assistance programs that do not provide significant medical coverage, stop-loss coverage and plans providing solely prescription drug coverage.

Reporting and Payment Deadlines

Plan sponsors must pay the fee if the plan is self-insured, but they may enlist third-party administrators to assist with payment. The insurance providers must pay the fee for insured plans. The deadline for reporting to HHS the number of covered lives each year is generally November 15th (now December 5th for 2014). HHS will then provide a notice of the assessed fee by the later of 30 days following receipt of the enrollment numbers and December 15th. Insurers and plan sponsors have two alternatives for paying the fee. They can either pay the fee in a single lump sum by January 15th of the following year (paying the full $63.00 per covered life for 2014), or they can pay it in two installments, with the first installment equal to the sum of $52.50 per covered life (for 2014) due by January 15th, and the second installment equal to $10.50 per covered life (for 2014) due by the following November 15th. The Department of Labor has indicated that the payment of the reinsurance fees can be treated as a plan expense under ERISA because the payment is required by the Affordable Care Act.

HHS recently released the form that insurers and sponsors of self-insured plans must use to register and report the number of persons enrolled in the health plan. The form can be accessed athttps://www.pay.gov/public/form/start/64510311. The reinsurance fee is also paid through www.pay.gov, which requires registration before submitting the form and making the payment.