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Guidance on Health Insurance Industry and Reinsurance Fees

Story content provided by Cigna on 3/8/13

On March 1, 2013, the Treasury Department and Internal Revenue Service (IRS) issued a proposed rule on the “Health Insurance Providers Fee.” Cigna refers to this as the “Health Insurance Industry Fee” to avoid confusion related to health care professionals/providers.

The final rule for the Reinsurance Assessment was also issued by the Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) on March 1. It is contained within the guidance entitled “Notice of Benefit and Payment Parameters for 2014.”

Both pieces of guidance are consistent with our prior communications on these topics, except with respect to expatriate plans.

Health Insurance Industry Fee

The Health Insurance Industry fee is effective January 1, 2014, and is due by September 30 following the data year. The first payment is due September 30, 2014 for the 2013 data year.

The total fee to be collected from all applicable covered entities for calendar year 2014 is $8 billion, increasing to $11.3 billion in 2015 and 2016 and $13.9 billion for 2017.

The fee for each “covered entity” will be proportionate to the insurer’s share of net premium written by all covered entities for U.S. health risks during the preceding calendar year. (Covered entities with less than $25 million of net premium are not subject to fee.)

Covered Entities 

The fee is imposed on covered entities, which include any entity that provides “health insurance” for any United States health risk during the applicable calendar year. Covered entities include insurance companies and HMOs, but not self-insured plans. Treasury has not yet  provided guidance on how the fee will be applied, if at all, to expatriate plans.

The insurance products embraced by the term, “health insurance,” include:

  • Medical
  • Standalone dental/vision, even if an “excepted benefit”
  • Standalone behavioral
  • Standalone pharmacy
  • Medicare Advantage, Medicare Part D
  • Medicaid and Medicaid and Children's Health Insurance Program (CHIP)

Excluded products include:

  • Medicare Supplement

Read the Proposed Rule.

Reinsurance Assessment

The final rule confirmed the earlier proposed rule for the transitional reinsurance assessment – a fee that will be due for a three year period. It applies to both insured and self-insured plans that provide major medical coverage. It also applies to insured group “expatriate” coverage written in the U.S. It does not apply to stand-alone prescription drug, behavioral health, dental or vision plans, nor does it apply to employer-sponsored plans that supplement Medicare.

Insurers will pay the fee for insured plans. The plan sponsor is responsible for paying the fee for self-insured plans, and may either pay it themselves or choose to have a third-party administrator (TPA) facilitate payment on their behalf.

The fee is a flat dollar amount per covered person and will be paid annually from 2014 through 2016. By November 15, 2014, insurers, employers and TPAs must report their number of covered lives for the first nine months of the year to HHS. HHS will communicate the amount due by December 15.

The annual fee amount for 2014 is $63 per covered individual.

Read the Final Rule.

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