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Life Health > Health Insurance

What if a plan skips a PPACA reinsurance payment?

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Federal auditors could soon be checking to see how well insurers and self-insured group plans are paying into the new Patient Protection and Affordable Care Act (PPACA) reinsurance program. 

The U.S. Department of Health and Human Services (HHS) bases the amounts insurers and self-insured plans owe for the reinsurance program on enrollee counts.

Federal auditors will be looking for records that “confirm that the number of covered lives was correctly calculated and that the correct amount of reinsurance contributions was paid,” officials with the Centers for Medicare & Medicaid Services (CMS), an arm of HHS, wrote in an answer to a question from a member of the public.

Federal auditors will also look for entities that were supposed to pay into the reinsurance program and failed to do so, CMS officials say.

“A contributing entity must maintain documents and records, whether paper, electronic, or in other media, sufficient to substantiate the enrollment count submitted pursuant to this section for a period of at least 10 years,” officials say.

A contributing entity has to be ready to show its enrollment records to auditors from HHS itself, the HHS Office of Inspector General (HHS OIG), and the U.S. Government Accountability Office (GAO), officials say.

See also: What the PPACA exchange cops hope to bag

CMS officials talk about PPACA reinsurance program payment compliance audits, and other reinsurance program payment issues, in two informal answers to questions from members of the public. CMS posted the questions and answers behind a log-in wall in the frequently asked questions (FAQ) section of the Registration for Technical Assistance Portal (REGTAP) website.

PPACA prohibits health insurers from using personal health information when deciding whether to issue individual and small-group coverage. The law also prohibits insurers from using personal information other than applicant age, location and tobacco use when setting coverage premiums.

Drafters of PPACA created the reinsurance program in an effort to protect health insurers against spikes in health claim risk that might occur because of the new PPACA underwriting rules and other PPACA rules and programs. The reinsurance program is supposed to pay a portion of the enrollee claims costs for enrollees who end up with very high claim totals in 2014, 2015 or 2016. For 2014, the “attachment point,” or reinsurance deductible, is $45,000. The program will cover 2014 claims over $45,000, up to a maximum of $250,000.

HHS is funding the reinsurance program by imposing a flat per-enrollee reinsurance program charge on every enrollee in an insured major medical plan and many enrollees in self-insured employer group health plans. 

CMS officials have seemed to be comfortable with PPACA reinsurance program fee revenue. Originally, CMS officials promised to pay just 80 percent of the eligible 2014 claims. In June, officials said CMS had taken in enough reinsurance program revenue to pay 100 percent of the amount eligible for reinsurance protection.

But the new CMS reinsurance payments FAQs imply that some contributing entities may have been slow to make their contributions. In addition to answer a question about reinsurance program payment audits, CMS officials talk about the consequences for making program payments late.

“Any amount owed to the federal government by an issuer and its affiliates for reinsurance is a determination of debt,” officials say.

Reinsurance program debt “will be subject to the federal debt collection rules,” officials say.

The amounts owed are subject to the federal False Claims Act (FCA), officials add.

CMS officials do not give details in the new guidance about the kind of federal collection process that would apply to reinsurance collections, or how CMS thinks the False Claims Act penalties would be applied.

In earlier discussions of debt collection for another PPACA program, the PPACA risk-adjustment program, CMS officials said that CMS “will use all appropriate debt collection processes available to the federal government.”

See also: What if CMS risk-adjustment bill collectors fail?

In 2013, CMS officials said they had been asking the U.S. Treasury Department, the parent of the Internal Revenue Services (IRS), to help collect delinquent debts for a non-PPACA CMS program. 


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