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ACA Reporting for "Minimum Premium" Arrangements


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We have clients who participate in minimum premium arrangements with insurers (which, in a nutshell, offer insured coverage but with cash-flow advantages of self-funding). At least one of the insurers has taken the position that a minimum premium arrangement is self-funded, rather than fully-insured, and as such, the insurer will not be reporting on Form 1095-B. Instead, the employer, as self-funded sponsor, should report on Part III of Form 1095-C. This was a surprise to clients and to me. I checked the final instructions and they don't appear to call out filing obligations for minimum premium arrangements or any "partial self-funding" situations. I would like to push back on the insurers so they do the reporting, but I'm not finding any clear authority. Thanks in advance if you have anything to share.

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Without seeing the contract between your client and the "insurer" I tend to agree with the "insurer" that you probably don't have an insured plan (employer is bearing some risk).

In addition to reviewing the contract you'll want to check with your state insurance regulators to see if this "plan" is registered with them for offering as an insured plan in your state.

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My understanding of the "minimum premium arrangement" you describe (and they go by other names too in the broker market) is that the insurance company is fully on the hook for the medical expenses, without being able to assess the employer any more than what it pays upfront and periodically as premiums. However, there is a rebate against the next policy year's premiums based on the ended year's claims experience, so that the net cost to the employer for that ended year was not much more than the actual claims experience. The difference being some extra to the insurance company for it taking what risk it does of paying more. The employer pays a higher upfront amount, so that the insurance company is taking less of a risk.

If this is what kind of arrangement you have, I think it is fully insured. If the claims experience exceeds what the insurance company charged the employer, then that is a loss borne by the insurance company (even if for the next year it wants more in premiums than the experience year just ended).

On the other hand, if the arrangement calls for the employer to reimburse the insurance company for claims after what was paid previously by the employer has been exhausted, then it is a self-insured arrangement.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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Look to your agreement.

Almost every minimum funding arrangement that i have seen is regarded as being fully insured.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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I agree with Flyboy, you should review the contract/plan documents and not pay attention to the name given the plan. Minimum Premium Plans (MPP) is not considered a self-funded plan, and as such is subject to state regulation. That being said, I am not saying that your plan is insured. There is considerable confusion in the marketplace about these types of plans and considerable use of terms incorrectly.

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Beyond an allocation of medical claims expenses, does one or more of the agreements between the insured/administrator/employer and the insurer/claims administrator allocate plan-administration expenses?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Thanks everyone for the thoughtful responses. This arrangement is definitely papered as if it is fully insured (e.g., contract filed with the insurance department, etc.). The insurer at issue pays the PCORI as well (as an insurer would do for a fully-insured arrangement). Feedback from the insurer indicates that they treat this arrangement as insured for "regulatory purposes" but as self-funded for "statutory and accounting purposes" which is why they believe they aren't on the hook for reporting. I think the client has a good argument that it has no obligation to report the coverage (other than as required because it's an ALE subject to the ACA) but if the IRS doesn't agree, they could be on the hook for failure to report penalties (which I realize won't be enforced for the first year of reporting, so maybe we hold off on reporting this year and see what happens?)...

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I think that it is dangerous to put off the resolving of issues, such as this, because of the likelihood of there still being confusion at the last minute.

In most cases, people get incorrect answers from their providers because they ask the wrong person. I suggest that your client get a written answer from much higher up the food chain. The "feedback" which you are reporting is gobbledygook. The fines for getting it wrong could be relatively large. Get it resolved while there is time.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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  • 2 months later...

This almost sounds like a level-funded plan. If that is the case, the Plan is considered self-funded for just about all purposes, even though the sponsor isn't in the hook for claims in excess of contributions. Level-funded plans are self-funded but include a stop loss component to protect the sponsor from incurring claims in excess of funding. But, the reinsurer usually requires the Plan to be funded at maximum liability, rather than minimum. So the fact that they're funding at minimum makes me think it may not be "level-funded."

I would suggest asking the agent that sold the Plan if it's considered level-funded. If it is, it's self-funded and the Plan sponsor is responsible for all of the reporting. If it isn't....I have no idea who's ultimately responsible.

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