The Health Care Reform law establishes a transitional reinsurance program to help stabilize premiums for coverage in the individual market during the first three years of implementation. Beginning January 1, 2014, reinsurance programs will include three key elements: HHS will administer the program; health insurance issuers and plan sponsors of group health plans will be required to pay reinsurance fees to HHS, and; HHS will use the fees to make reinsurance payments to health insurance issuers in the individual market for high-cost claims (note: reinsurance will be available for both on-Exchange and off-Exchange individual policies other than grandfathered policies). Reinsurance payments will be a specified coinsurance amount for claims incurred above an attachment point and below a reinsurance cap.

For each year in the three-year period, HHS will issue an annual notice specifying the required reinsurance fee and the applicable reinsurance parameters (the coinsurance rate, the attachment point and the reinsurance cap). For 2014, HHS has indicated that:

• the reinsurance fee will be as high as $63 per covered life (plan sponsors and issuers must report covered life information by November 15, 2014; HHS will send invoices by December 15, 2014; and invoices will be payable in 30 days)
• the coinsurance rate will be 80%; the attachment point will be $60,000; and the reinusrance cap will be $250,000.

While details are still forthcoming, it appears that plan sponsors will be required to pay the reinusrance fee directly, unless the plan sponsor delegates this task to a third-party administrator.