The drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) included the reinsurance program in PPACA in an effort to protect issuers of PPACA-compliant individual major medical coverage against big swings in risk created by PPACA rules. PPACA now requires insurers in the individual market to take applicants without considering their personal health information and to price individual coverage without using personal health information other than age and use of tobacco.
This year, the U.S. Department of Health and Human Services (HHS) is collecting a PPACA reinsurance program fee of $5.25 per member per month for every enrollee in a commercial insured medical plan or a self-funded employer health plan. The HHS program managers are supposed to use the cash collected in 2014 to help pay part of the eligible claim costs for people covered by PPACA-compliant individual medical policies who have more than $45,000 in claims in 2014. For 2014, the program is supposed to pay 80 percent of a patient’s costs between the $45,000 “attachment point” and a $250,000 maximum.
In 2015, HHS expects to charge $3.67 per member per month. For 2015, the PPACA reinsurance program is supposed to cover 50 percent of claims between a $70,000 attachment point and a $250,000 maximum.
For 2014 PPACA plan rate filings and quarterly corporate financial statements, and for many 2015 PPACA plan rate filings, some health insurers have taken a cautious approach to accounting for the PPACA reinsurance program. The insurers have assumed that they will have to pay program fees and user fees but have tried to avoid making assumptions about how much cash they’ll get from PPACA risk programs. Regulators have encouraged insurers to use projected reinsurance program recoveries to hold down 2015 rates.