42 U.S.C. § 18061: Transitional reinsurance…

Summary

States must, by January 1, 2014, add rules and set up (or hire) one or more nonprofit reinsurance organizations to run a three-year reinsurance program for the individual insurance market starting in 2014. Under federal model rules made with the NAIC, health insurers and third-party administrators must pay into the reinsurance fund for plan years beginning in 2014, 2015, and 2016. The fund pays insurers that cover high-risk people in the individual market (not grandfathered plans). High-risk people are identified either by a list of 50–100 medical conditions or by another objective method recommended by the American Academy of Actuaries. Payment amounts to insurers can follow a per-condition schedule or another AAA-recommended formula that supports care coordination. Contributions can be set as a percent of revenue or a flat amount per enrollee, may include an administrative fee, and must reflect each issuer’s share of business. All states together must collect $10,000,000,000 for 2014, $6,000,000,000 for 2015, and $4,000,000,000 for 2016. In addition, issuers must cover shares of $2,000,000,000 for 2014, $2,000,000,000 for 2015, and $1,000,000,000 for 2016; those extra amounts must go to the U.S. Treasury and cannot be used for the reinsurance program. Collected funds may be spent across the three years as needed, and money left on December 2016 can be used for state reinsurance programs in 2017–2018. States must change any existing state high-risk pools if needed and may coordinate them with the new program. Definitions: High-risk individual—people identified by the listed conditions or another actuarial method. Applicable reinsurance entity—a nonprofit that runs the fund to help stabilize individual market premiums.

Title 42, §18061

The Public Health and Welfare, Source: USLM XML via OLRC

(a)In general

Each State shall, not later than January 1, 2014—

(1)include in the Federal standards or State law or regulation the State adopts and has in effect under section 18041(b) of this title the provisions described in subsection (b); and

(2)establish (or enter into a contract with) 1 or more applicable reinsurance entities to carry out the reinsurance program under this section.

(b)Model regulation

(1)In general

In establishing the Federal standards under section 18041(a) of this title, the Secretary, in consultation with the National Association of Insurance Commissioners (the “NAIC”), shall include provisions that enable States to establish and maintain a program under which—

(A)health insurance issuers, and third party administrators on behalf of group health plans, are required to make payments to an applicable reinsurance entity for any plan year beginning in the 3-year period beginning January 1, 2014 (as specified in paragraph (3); and

(B)the applicable reinsurance entity collects payments under subparagraph (A) and uses amounts so collected to make reinsurance payments to health insurance issuers described in subparagraph (A) that cover high risk individuals in the individual market (excluding grandfathered health plans) for any plan year beginning in such 3-year period.

(2)High-risk individual; payment amounts

The Secretary shall include the following in the provisions under paragraph (1):

(A)Determination of high-risk individuals

The method by which individuals will be identified as high risk individuals for purposes of the reinsurance program established under this section. Such method shall provide for identification of individuals as high-risk individuals on the basis of— (i)

(ii)any other comparable objective method of identification recommended by the American Academy of Actuaries.

(B)Payment amount

The formula for determining the amount of payments that will be paid to health insurance issuers described in paragraph (1)(B) that insure high-risk individuals. Such formula shall provide for the equitable allocation of available funds through reconciliation and may be designed—

(i)to provide a schedule of payments that specifies the amount that will be paid for each of the conditions identified under subparagraph (A); or

(ii)to use any other comparable method for determining payment amounts that is recommended by the American Academy of Actuaries and that encourages the use of care coordination and care management programs for high risk conditions.

(3)Determination of required contributions

(A)In general

The Secretary shall include in the provisions under paragraph (1) the method for determining the amount each health insurance issuer and group health plan described in paragraph (1)(A) contributing to the reinsurance program under this section is required to contribute under such paragraph for each plan year beginning in the 36-month period beginning January 1, 2014. The contribution amount for any plan year may be based on the percentage of revenue of each issuer and the total costs of providing benefits to enrollees in self-insured plans or on a specified amount per enrollee and may be required to be paid in advance or periodically throughout the plan year.

(B)Specific requirements

The method under this paragraph shall be designed so that—

(i)the contribution amount for each issuer proportionally reflects each issuer’s fully insured commercial book of business for all major medical products and the total value of all fees charged by the issuer and the costs of coverage administered by the issuer as a third party administrator;

(ii)the contribution amount can include an additional amount to fund the administrative expenses of the applicable reinsurance entity;

(iii)the aggregate contribution amounts for all States shall, based on the best estimates of the NAIC and without regard to amounts described in clause (ii), equal $10,000,000,000 for plan years beginning in 2014, $6,000,000,000 for plan years beginning 2015, and $4,000,000,000 for plan years beginning in 2016; and

(iv)in addition to the aggregate contribution amounts under clause (iii), each issuer’s contribution amount for any calendar year under clause (iii) reflects its proportionate share of an additional $2,000,000,000 for 2014, an additional $2,000,000,000 for 2015, and an additional $1,000,000,000 for 2016.

Nothing in this subparagraph shall be construed to preclude a State from collecting additional amounts from issuers on a voluntary basis.

(4)Expenditure of funds

The provisions under paragraph (1) shall provide that—

(A)the contribution amounts collected for any calendar year may be allocated and used in any of the three calendar years for which amounts are collected based on the reinsurance needs of a particular period or to reflect experience in a prior period; and

(B)amounts remaining unexpended as of December, 2016, may be used to make payments under any reinsurance program of a State in the individual market in effect in the 2-year period beginning on January 1, 2017.

Notwithstanding the preceding sentence, any contribution amounts described in paragraph (3)(B)(iv) shall be deposited into the general fund of the Treasury of the United States and may not be used for the program established under this section.

(c)Applicable reinsurance entity

For purposes of this section

(1) In general

(2)State discretion

A State may have more than 1 applicable reinsurance entity to carry out the reinsurance program under this section within the State and 2 or more States may enter into agreements to provide for an applicable reinsurance entity to carry out such program in all such States.

(3)Entities are tax-exempt

An applicable reinsurance entity established under this section shall be exempt from taxation under chapter 1 of title 26. The preceding sentence shall not apply to the tax imposed by section 511 such title (relating to tax on unrelated business taxable income of an exempt organization).

(d)Coordination with State high-risk pools

The State shall eliminate or modify any State high-risk pool to the extent necessary to carry out the reinsurance program established under this section. The State may coordinate the State high-risk pool with such program to the extent not inconsistent with the provisions of this section.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2010—Pub. L. 111–148, § 10104(r)(1), substituted “market” for “and small group markets” in section catchline. Subsec. (b)(2)(B). Pub. L. 111–148, § 10104(r)(2), substituted “paragraph (1)(B)” for “paragraph (1)(A)” in introductory provisions. Subsec. (c)(1)(A). Pub. L. 111–148, § 10104(r)(3), substituted “individual market” for “individual and small group markets”.

§18061 Transitional Reinsurance Program for Individual Market in Each State

Summary

Title 42, §18061

Notes & Related Subsidiaries

Editorial Notes

Amendments

Citations & Metadata