‘Reduction Factor’ Outlined for Reinsurance Fee Calculation

‘Reduction Factor’ Outlined for Reinsurance Fee Calculation

Plan sponsors that offered a self-funded health plan for part, but not all, of the first nine months of 2014 and that counted their employees on a quarterly basis to calculate their Reinsurance Assessment Fee contribution should use a reduction factor to determine their contribution, the Centers for Medicare & Medicaid Services (CMS) reported.

This revised approach recognizes that employers may have offered fully insured plans for part of the first nine months of the calendar year and allows plan sponsors to accurately reflect the amount of time that health coverage was provided to plan participants through a self-funded plan.

The reduction factor can be used only by plan sponsors that meet the criteria outlined above and that used the Snapshot Factor or Snapshot Count method to count the number of health participants on a quarterly basis.

Here is one example: A plan sponsor with a health plan that terminated on August 31, 2014, (or 62 days into the third quarter) would be entitled to reduce its count of covered lives for the third quarter by 30/92, the proportion of the quarter during which the plan had no enrollment.

CMS provided two other examples:


For more information on the Reinsurance Assessment Fee, follow this link.