Transitional Reinsurance Program – Final Rule for 2015
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 final rule issued on March 11, 2014, the U.S. Department of Health and Human Services (HHS) finalized the 2015 payment parameters for reimbursing medical claims under the TRP, which had previously been proposed on December 2, 2013. HHS also finalized the reduction in the 2014 attachment point.
2014 Payment Parameters
- Attachment point reduced to $45,000 from $60,000
2015 Payment Parameters
- Attachment point of $70,000 increasing from $45,000 in 2014
- Reinsurance cap kept at $250,000
- Coinsurance rate of 50% decreasing from 80% in 2014.
In our white paper “Learn the Facts: The PPACA Transitional Reinsurance Program” issued 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?
2014 – The reduction in the attachment point means that an insurer of an individual policy will now be able to recover up to an additional $15,000 under the TRP for each claim that exceeds $45,000.
2015 – The calculations are much less for an insurer of an individual policy. Using the example of a claimant with $400,000 of medical claims, in 2015 the insurer will only be able to claim $90,000 under the TRP, calculated as ($250,000 – $70,000) x 50 percent, compared to $164,000 in 2014, calculated as ($250,000 – $45,000) x 80 percent. So insurers can expect their per-claim TRP recoveries to decrease by up to $74,000 ($164,000 – $90,000) or by 45%.
Change to the reinsurance contribution rate
The other side to this equation, of course, is the reinsurance contribution rate that group health plan sponsors have to pay into the TRP, which HHS has finalized at $44 per enrollee/member for 2015. This compares to the rate of $63 for 2014.
In order to maximize the financial effect of the TRP, in its final rule HHS provided that if reinsurance contributions collected for a benefit year exceed total requests for reinsurance payments for the benefit year, HHS will increase the coinsurance rate on reinsurance payments for that benefit year up to 100 percent, rolling over any remaining funds for use as reinsurance payments for the subsequent benefit year.
HHS has also finalized that the TRP reinsurance contribution for 2014 and 2015 is payable in two installments each year, as follows:
- 2014 – $63 fee – payable $52.50 in January 2015 and $10.50 in the fourth quarter of 2015
- 2015 – $44 fee – payable $33 in January 2016 and $11 in the fourth quarter of 2016
The January payments will be allocated toward TRP reinsurance payments and administrative expenses, with the fourth quarter payments being paid to the U.S. Treasury.
Looking for more details on the Transitional Reinsurance Program? Download our whitepaper “Learn the Facts: The PPACA Transitional Reinsurance Program.“