Transitional Reinsurance Tax

ResourcesHot Spots > Transitional Reinsurance Tax

The Transitional Reinsurance Tax was established to help stabilize premiums for the individual market. This tax is paid to health insurance companies who provide coverage for high risk individuals in the individual insurance market. Health and Human Services has projected that $25 Billion will be needed to offer coverage to these individuals.

Who does it apply to?

The Health insurance companies will pay this tax on behalf of employers who are Fully Insured. Self-Funded employers will be responsible for calculating and remitting this tax.

How much is the tax for 2016?

2016 – $27 per covered life for 2016

Key Deadlines:

  • November 15, 2016
    • Submit Annual Enrollment Count and Schedule Contribution Payment Dates to
  • January 17, 2017
    • Remit entire amount ($27/covered life) OR
    • Remit first installment amount ($21.60/covered life)
  • November 15, 2017
    • Remit second installment amount ($5.40/covered life)

How to determine number of covered lives?

The IRS approved four counting methods to determine the average number of members.

  • Actual Count
  • Snapshot Dates
  • Snapshot Factor
  • Form 5500 Method

These counting methods are the same counting methods used for the PCORI tax.

Actual Count
Count the total covered lives for each day of the plan year and divide by the number of days in the plan year. (For the Reinsurance Fee, you only count lives during the first nine months of the plan

Snapshot Dates
Count the total number of covered lives on a single day in each quarter (or more than one day) and divide the total by the number of dates on which a count was made. (The date or dates must be consistent for each quarter. Reinsurance Fee only looks at the first three quarters of the plan year.)

Stay Connected:
Snapshot Factor
In the case of self-only coverage and other than self-only (e.g., family or self-only plus one) coverage, determine the sum of: (1) the number of participants (i.e., employees or retirees) with
self-only coverage multiplied by 2.35.

Form 5500 Method
For plans with self-only coverage, determine the average number of participants by combining the total number of participants at the beginning of the plan year with the total number at the end
of the plan year, divided by 2.

For plans with other than self-only coverage (e.g., family or self-only plus one) the average number of total lives is the sum of total participants covered at the beginning and the end of the plan year, as reported on Form 5500.

For more information:
United Health Care Release on the Reinsurance Tax
Cigna Release on the Reinsurance Tax
IRS info on ACA Provisions

Babb, Inc., will continue to monitor the regulations coming out of PPACA and will continue to ensure you are WellAdvised of provisions that will impact your business and your people.

Please contact us if you have any questions regarding these most recent developments.