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The Consumerization of Insurance Brings Innovators and Entrepreneurs to the Playing Field

Driscoll

by Brian Driscoll, Managing Principal

Recently I saw a provocative headline from an article published earlier this year in The Fiscal Times —  Hospitals Plot the End of Insurance Companies. The article highlights a growing trend in which healthcare systems look to increase revenues by providing new products and/or services direct to consumers or employer plan sponsors.

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Know The Rules

2 Crucial Responsibilities Self-Insured Employers Need to Act on Now

by  Pia Brown, Senior Consultant 

Employers who offer a self-insured medical plan now have two additional responsibilities: 1) Submitting for the Transitional Reinsurance Fee by November 15, 2014, and 2) Applying for an ACA and HIPAA Health Plan Identifier (HIPD) Number by November 5, 2014 or for “small plans” 2015.

Transitional Reinsurance Program Requirements

1) The Transitional Reinsurance Program was created by the Affordable Care Act section 1341 to help stabilize premiums in the individual market until 2016 by collecting $25 billion in fees from group health plans to partially reimburse insurers who cover high-cost individuals in the newly formed state marketplaces. Recently Aetna announced a likely $50M from the program to cover their additional risk: http://www.lifehealthpro.com/2014/07/29/aetna-may-get-50-million-in-ppaca-reinsurance-mone , and CTs Insurance Department rejected Anthem’s proposed individual and small business rate hikes due to not having enough of an offset for likely ACA reinsurance funds: http://www.ct.gov/cid/cwp/view.asp?Q=510338.

The Transitional Reinsurance Program Fee applies as of January 1, 2014 to both insured and self-funded “major medical” plans regardless of the plan year or policy year. (Guidance issued late last year will exempt certain multi-employer self-funded and self-administered union plans from the reinsurance fees in 2015 -2016.)

So what do you need to do as a self-funded plan?

First, know that even if you use a “major carrier” as a TPA, you still need to file and pay this fee separately as plan sponsor (similar to PCORI/CERF/Form 720).

The fee for 2014 is $63 PMPY ($5.25 PMPM) and will be $44 PMPY in 2015 and decrease even more in 2016. The rate is a national uniform contribution rate and does not vary by state. The reinsurance fee will be collected by the Department of Health and Human Services (HHS) in the following sequence:

1) Self-funded plans and insurers must submit headcount information, based on the first three quarters of the calendar year (again, similar to POCRI/CERF) by November 15, 2014.

2) Procedure to complete the reinsurance payment process:

  • Plan registers on www.pay.gov
  • Completes the ACA Transitional Reinsurance Program Annual Enrollment and Submission Form (not ready yet)
  • Plan schedules payment

2014 deadlines:

  • Annual Enrollment Count – by 11/15/14
  • 1st Payment ($52.50/covered life) – by 1/15/15
  •  2nd Payment ($10.50/covered life) – by 11/15/15

For 2014’s reinsurance collection, $10B will go to the reinsurance pool, $2B to the Treasury’s general fund, and $20.3M for administrative expenses. Plans must keep records that substantiate the enrollment counts for at least ten years; the Department of Health and Human Services may audit entities for compliance with the reinsurance program standards.

Plans that will not be required to pay the reinsurance fee include:

“Excepted benefits” such as dental or vision plans, hospital indemnity or accident/critical illness plans.

  • HRAs and HSAs that are integrated with high-deductible health plans (only the underlying major medical HDHP would pay the annual reinsurance fee.)
  • Health Flexible Spending Accounts

Note that the fee generally is a tax-deductible expense to plan sponsors and insurers. Read more here.

Next, ACA, HIPAA and Health Plan Identifier (HPID) Requirements

The Department of Health and Human Services (HHS) requires employers who sponsor self-funded health plans to apply for a health plan identifier number (HPID) and certify that they, and their vendors, are in compliance with HIPAA transaction rules.

Self-insured health plans must obtain a Health Plan Identifier (HPID) by November 5, 2014.  However, “Small plans” defined as those with annual claims paid of $5 million or less have until November 5, 2015.

The HPID is a unique 10-digit identifier obtained through CMS and as of November 2016, health plans and other parties subject to HIPAA electronic standard transactions (health plans, medical providers, insurers, and third party administrators) must use their unique standard identifiers.

The purpose of requiring standard identifiers, formats and code sets is to increase the efficiency and accuracy of the transactions.

Note that although TPAs almost always conduct HIPAA standard transactions on behalf of self-insured plans they administer and use their own unique standard identifiers in such transactions, the plans themselves are also required to obtain HPIDs.

1. All employers with self-funded health plans will be required to obtain an HPID from HHS even if they hire other entities such as TPAs to conduct plan transactions.

2. Employers will need to get assurance from plan administrators and vendors who process transactions for the plan that the vendor has gone through a required testing process and has received the necessary certification from HHS.

3. Third-party administrators (TPAs) cannot obtain an HPID for self-funded health plans.

The CMS Health Plan Identifier webpage has helpful information, including step-by-step instructions to apply for an HPID. Click here for more information.

Need to know more? Contact your local Consultant or Advisor for more information on these latest requirements.