The CMS Transitional Reinsurance Program's collection target for 2015 was $12 billion, but the actual collections will be less than $10 billion.

The reinsurance fee of $63 per insured person was added to all fully insured individual and group health insurance premiums in 2014, while self-insured employers paid the fee directly to CMS. The fee in 2014 for an insured family of four was $252.

The pooling fee was established to spread the risk to the insurance industry caused by the ACA requirement to waive pre-existing condition limitations on all non-grandfathered individual health insurance policies beginning in Jan. 2014. For the first year, the government reimburses insurers for 80% of an individual's claims costs between the $45,000 attachment point and a $250,000 ceiling.

This is a three year program, which phases out after 2016. The assumption is that after three years the negative impact of increased claim costs caused by waiving pre-existing condition limitations will have been absorbed in the premiums. We are waiting for information to be released by the insurance industry regarding the volume of claims that exceeded the $45,000 attachment point per individual.

The long term effect on individual and small group community rate health insurance premiums caused by waiving pre-existing condition limitations is still the biggest risk to the success of the ACA. If claims increase dramatically, premiums will increase, the healthy will have less incentive to purchase health insurance and the insurance industry could be faced with a downward spiral of higher rates and fewer insureds.

Date: April 14, 2015

Subject: The Transitional Reinsurance Program's Contribution Collections for the 2014 Benefit Year

Section 1341 of the Affordable Care Act established a transitional reinsurance program to help stabilize premiums in the individual market inside and outside of the Marketplaces. The transitional reinsurance program collects contributions from health insurance issuers and certain self-insured group health plans (collectively, "contributing entities") at an annual per capita contribution rate to fund reinsurance payments to issuers of non-grandfathered reinsurance-eligible individual market plans, the administrative costs of operating the reinsurance program, and the general fund of the U.S. Treasury for the 2014, 2015, and 2016 benefit years. Under the Affordable Care Act, the 2014 benefit year statutory collection target is $12 billion, with an estimated $10 billion for reinsurance payments, and $2 billion for the general fund of the U.S. Treasury. The amount for administrative expenses for the 2014 benefit year is $20.3 million (78 FR 15410, 15461). In order to meet the $12.02 billion target for the 2014 benefit year, the Department of Health and Human Services (HHS) established an annual per capita contribution rate of $63.00 in the HHS Notice of Benefit and Payment Parameters for 2014 Final Rule (78 FR 15459).

Contributing entities were given the option to pay the 2014 benefit year contribution: (1) in one payment to be remitted no later than January 15, 2015, reflecting $63.00 per covered life; or (2) in two separate payments, with the first payment due by January 15, 2015, reflecting $52.50 per covered life, and the second payment due by November 15, 2015, reflecting $10.50 per covered life.