FIXING THE HEALTHCARE REINSURANCE FEE
• The Transitional Reinsurance Fee (aka Belly Button tax) is a tax imposed on insurance companies to help offset the higher costs associated with providing coverage to less healthy individuals. The fee will be assessed on a per capita basis for both fully insured and self-funded health plans and will help fund a reinsurance program for high cost individuals.
• The fee will impose a hardship on self-insured plans that will not be gaining new customers under the Affordable Care Act. Self-insured plans, such as those sponsored by unions and local governments, only cover people in a pre-determined class such as employees of a city.
• The relief proposed by the Obama Administration did not go far enough. In December 2013, the Administration exempted self-insured, self-administered plans from the reinsurance fee for the 2015 and 2016 benefit years. Unfortunately most self-insured plans are not self-administered and therefore will not be affected by the rule change.
• The Obama Administration proposed additional changes to the law, splitting the collection date for the reinsurance program to help spread out costs. For example, for the $63 year one fee a plan would owe $52.50 per covered life in January of 2015 and $10.50 sometime in the 4th quarter of 2015.
• The other changes proposed by the Administration—changing the timing of when payments are due and clarifying the application to supplemental or secondary group health coverage—also do not alleviate the additional financial burden imposed on self-insured plans.
• Administration officials claim that further relief must come from Congress because it would require a change in law. Members of Congress from both parties and both chambers have come out in support of fixing or eliminating the reinsurance fee.
• Opponents of fixing the Reinsurance fee claim that it would amount to a bailout for labor unions. Although many of the self-insured plans are sponsored by labor unions—most notably Taft-Hartley plans—there are many other plans that are sponsored by employers. In the public sector, most self-insured plans are sponsored by municipalities.
• Self-insured plans will face other challenges stemming from the Affordable Care Act. For example, their plan participants will not be able to access the subsidies that are provided to those who buy insurance on the exchange. The reinsurance fee will therefore exacerbate the problems being imposed on these plans by the Affordable Care Act.