HHS Doing “Regulatory Gymnastics” To Create Exemption For Certain Self-Insured Plans, Group Says

The “regulatory gymnastics” that the Department of Health and Human Services (HHS) is doing to exempt union multi-employer plans from the Patient Protection and Affordable Care Act’s (ACA) reinsurance fee raises serious questions and increases the cost for other employers, according to HR Policy Association comments submitted to HHS.

The ACA directs that a transitional reinsurance program be established in each state to help stabilize premiums for coverage in the individual market from 2014 through 2016. HHS regulations provide that each “contributing entity” must make reinsurance contributions annually.

Entities subject to fee. On Dec. 2, 2013, HHS issued proposed regulations that would modify the definition of a “contributing entity” for the 2015 and 2016 benefit years to exclude self-insured group health plans that do not use a third party administrator in connection with claims processing or adjudication (including the management of appeals) or plan enrollment.

In contrast, the proposed rule would result in self-insured plans that utilize third party administrators (i.e., most large companies) paying $370 million more for benefit year 2015 than they are statutorily required to pay, according to the Association. “These significant costs for Association member companies could potentially result in litigation over implementation of the final rule and delay the collection of reinsurance contributions and reinsurance payments. The regulatory gymnastics used by HHS to justify the exemption for self-insured self-administered plans raises serious questions about why the Department is proposing the carve-out after clearly rejecting such recommendations in previous final rulemakings,” the Association wrote.

Calculation of fee. The Association’s comments also urge HHS to recalculate the per capita reinsurance fee for all self-insured plans for benefit years 2014 and 2015 to exclude the $3 billion in Treasury contribution amounts. “A careful reading of the statutory language in the ACA clearly shows that self-insured group health plans are only obligated to pay reinsurance contribution amounts and administrative fees, and not the Treasury contribution amounts,” according to the Association.

Although the Association expressed its appreciation at the decision to enable self-insured employers to make the 2015 and 2016 reinsurance contributions in two installments, the Association recommended that HHS allow self-insured employers to have the option, at their discretion, of paying the entire reinsurance fee with the first installment should they find it beneficial to do so.

“Although we remain committed to working with HHS to maximize the flexibility employers have to implement their ACA obligations and to minimize the substantial cost the reinsurance fee will impose on employers, HR Policy has a number of serious concerns about the proposed rule that improperly increase the cost of the fee for member companies that if not addressed could potentially result in litigation over implementation of the final rule,” wrote D. Mark Wilson, HR Policy Association’s chief economist and vice president, health and employment.

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