PPACA Update: Changes to Transitional Reinsurance Program
The Transitional Reinsurance Program (TRP) was established under PPACA and pays for a corridor of medical claims to help stabilize premiums in the individual health insurance market. A federally mandated reinsurance program, it provides reinsurance to issuers of individual health insurance policies from 2014 to 2016.
Changes to the payment parameters under the TRP
In its proposed rule issued on November 21, 2014, the U.S. Department of Health and Human Services proposed the 2016 payment parameters for reimbursing medical claims under the TRP. HHS also proposed a reduction in the 2015 attachment point.
2015 Payment Parameters
- Attachment point reduced to $45,000 from $70,000
2016 Payment Parameters
- Attachment point of $90,000 increasing from $45,000 in 2015
- Reinsurance cap kept at $250,000
- Coinsurance rate kept at 50%
On page 7 of our white paper “Learn the Facts: The PPACA Transitional Reinsurance Program” issued back in May 2013, we set out an example of the financial effect of the Transitional Reinsurance Program. How do these changes to the payment parameters affect the calculations?
|2015:||The reduction in the attachment point means that an insurer of an individual policy will now be able to recover up to an additional $25,000 under the TRP for each claim that exceeds $45,000.|
|2016:||Using the example of a claimant with $400,000 of medical claims, in 2016 the insurer will only be able to claim $80,000 under the TRP, calculated as ($250,000 – $90,000) x 50 percent, compared to $102,500 in 2015, calculated as ($250,000 – $45,000) x 50 percent or $164,000 in 2014 when the coinsurance rate is 80%. So insurers can expect their per claim TRP recoveries to decrease by up to $22,500 ($102,500 – $80,000) or by 22% in 2016 compared to 2015.|
Change to the reinsurance contribution rate
The other side to this equation continues to be the reinsurance contribution rate that group health plan sponsors have to pay into the TRP which HHS has proposed as $27 per enrollee/member for 2016. This compares to the rate of $44 for 2015 and $63 for 2014.
The contribution rates for a calendar year can be paid in one single installment by January 15th of the following year or paid in two installments, as follows:
- 2014 – $63 fee – $52.50 by January 15, 2015 and $10.50 by November 15, 2015
- 2015 – $44 fee – $33.00 by January 15, 2016 and $11.00 by November 15, 2016
- 2016 – $27 fee – $21.60 by January 15, ,2017 and $5.40 by November 15, 2017
The January payments will be allocated towards TRP reinsurance payments and administrative expenses, with the November payments being paid to the U.S. Treasury.
TRP Summary Table
The following table summarizes the payment parameters and contribution rates for each of the three years of the TRP.
2015 will be an active year under the TRP with the first reinsurance contribution rates being paid and the first TRP reinsurance claims being submitted and paid in accordance with the key dates set out here.
Looking for more details on the Transitional Reinsurance Program? Download our whitepaper “Learn the Facts: The PPACA Transitional Reinsurance Program.”