Better Pay Attention to HHS Reinsurance Plan

Red flags are starting to wave over a temporary reinsurance program the U.S. Department of Health and Human Services has proposed as part of the Affordable Care Act.

The HHS intends for the program — which would take effect in 2014 — to stabilize premiums, not allow coverage denials because of pre-existing conditions, and limit premium variations based on age, gender and smoking status.

What’s raising concerns — “ire” might be a better descriptor — is a clause within the proposed plan that imposes an annual $63 per-health-plan-recipient fee on group-health-plan providers, i.e., employers.

Just Saturday, in this story from the Columbus Dispatch, U.S. Rep. Pat Tiberi, who represents Ohio’s 12th congressional district, blasted the proposed rule. He’s worried the plan that would be imposed on employers who pay for insurance might spur them to stop providing it to their employees, pushing them into insurance exchanges instead.

“This was buried in the healthcare-reform legislation,” he told the Dispatch, “and no one ever talked about it.”

Indeed, as Chantel Sheaks, a principal in the Washington-based government-affairs practice for Buck Consultants, puts it: “I call this the sleeper issue of 2012 … and people are waking up to a nightmare.”

She goes on to say that the statute is unclear and confusing in the way it refers to those responsible for feeding this reinsurance fund as “issuers” and “third-party administrators on behalf of group health plans.” In the preamble of a revision to the statute, issued earlier this month, “group-health plans” are cited as the responsible parties.

According to Sheaks, this could be a devastating blow to the business community.

“Let’s assume you’re a small employer, you have 500 employees, so you have about 1,000 covered individuals on the plan,” she says. “So, looking at [$63 per covered head, that fee] is going to be $63,000. That’s someone’s salary; maybe two.”

The money slated to feed into the fund is hefty, according to this alert from Lockton Health Reform Advisory Practice: $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016.

For the record, the fee is intended to be a temporary, three-year assessment that will decrease each year, with most of the money going into an HHS fund aimed at helping providers with costs incurred by medical and chronic conditions of those covered through the employer, as well as the cost of covering uninsured people with health problems.

As HHS spokesperson Erin Shields Britt told the Dispatch, “Congress included this program to reduce premiums for people who buy insurance. This three-year program will help ensure people who have insurance no longer have to shouler the cost of caring for the uninsured, which has raised healthcare costs for decades.”

For your reference, here is the HHS’ site for overall information regarding healthcare reform, as it applies to individuals, providers and businesses. Here too, for further reference, is the Assocated Press story about the proposal that ran on the Fox News site.

Other helpful links include this complete information sheet from Buck Consultants on the transitional reinsurance program and the higher costs for group health plans, the final reinsurance regulations issued by the HHS in March and the more recent proposed changes to those final regs, issued earlier this month, in which the reference to group-health-plan responsibility can be found in the preamble.

So, what should employers be doing with all this, you ask? Sheaks says “take action.”

Too many employers and their HR leaders have been resting way too comfortably in the mistaken knowledge that this particular piece of healthcare-reform legislation couldn’t possibly impact them this much, she says. “They thought they might be charged something, but I don’t think any of them were thinking $63 per [covered] head per year — employees and their families,” she says.

With some time left to change the tide, she adds, “now is the time to really sit down and talk about such a massive fee on employers.”

“If [HR and benefits professionals] haven’t communicated this to their CEOs or CFOs,” she says, “they should do so immediately [and decide] what they’re going to do: Avoid the cost [and] pay the penalty? Pass it along? All of it or some of it?

“When I talked to some of my cohorts on the employer side, they said, ‘This is a lot of money, but the issuers will probably pay for most of this and the HHS will contribute some.’ ”

Evidently, it appears they may have been wrong.