CurrentMedicarePolicy N/A

Usage of Section 1303 Segregated Account Funds by Individual Market QHP Issuers

Guidance for individual market Qualified Health Plan (QHP) issuers on how to collect, segregate, and use premium funds held in Section 1303 segregated accounts (non-Hyde abortion segregated accounts and segregated accounts for all other covered services), including post-plan-year treatment of unspent funds and restrictions on federal funding for non-Hyde abortion services.

Policy Summary

PayerMedicare

PolicyUsage of Section 1303 Segregated Account Funds by Individual Market QHP Issuers

Policy CodePolicy N/A

Change TypeNo material change

Effective DateN/A

Next Review DateN/A

Key ActionMove unspent funds from non-Hyde abortion segregated accounts to general issuer-managed accounts after plan year end and after all claims are paid or accounted for.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

>=1min monthly AV allocation ($)

2separate monthly payments

1plan year window (years)

0federal funds allowed for non-Hyde abortions

Permitted Uses and Restrictions

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Use and restrictions for Section 1303 segregated account funds

Permitted use and restrictions for segregated account funds

During the plan year in which segregated premium payments are collected, funds in each segregated account must be used exclusively for their designated purpose (non-Hyde abortions vs all other covered services).

QHP issuers must collect two separate per-enrollee monthly payments: one to cover the AV of non-Hyde abortion coverage (not less than $1 per enrollee per month) and one for all other covered services, and deposit each payment into its respective segregated account.

After the conclusion of the plan year and once all claims for that plan year have been paid or accounted for, unspent funds in each segregated account become earned premium revenue and may be used in the same manner as other premium funds subject to applicable federal and state law.

To utilize unspent funds in a non-Hyde abortion segregated account for purposes other than non-Hyde abortion services after the plan year concludes and claims are paid or accounted for, issuers must move those unspent premium funds to general issuer-managed accounts.

Federal funds, including amounts attributable to premium tax credits and cost‑sharing reductions (including advance payments), may never be used to pay for non‑Hyde abortion services, at any time.

Issuers are expected to maintain sufficient funds in their non‑Hyde abortion segregated accounts to pay all claims for each plan year in which they collected the premium funds; funds reallocated after the plan year may not be used to cover non‑Hyde abortion services.

Rationale

Statutory and regulatory language and rate‑development mechanics indicate segregation and exclusivity apply for the finite plan year of collection rather than in perpetuity.
Treating unspent segregated funds as earned premium revenue after the plan year aligns with insurance principles that premiums are made in advance for a specified term and become earned once that term ends.

Operational note: During the plan year, segregated account funds must be used exclusively for their assigned purpose; after the plan year and claims accounting, issuers may reallocate unspent funds consistent with federal and state requirements.

Issuer Actions and Restrictions

Billing Rule

Post-plan-year fund transfer

QHP issuers may treat unspent funds in non-Hyde abortion segregated accounts the same as other premium funds under applicable federal and state law once the coverage period ends at the conclusion of the plan year in which the funds were collected and after all claims are paid or otherwise accounted for. To use these unspent funds for purposes other than non-Hyde abortion services, issuers must transfer the remaining premium funds from their non-Hyde abortion segregated accounts into general issuer-managed accounts. Issuers may then determine how to utilize those funds consistent with federal and state requirements and the best interests of the issuer and its enrollees.

Unspent segregated-account funds may be moved to general issuer-managed accounts only after the plan year ends and all claims are paid or accounted for.
Issuers retain discretion over use of reallocated funds consistent with applicable federal and state law.

Denial Risk

Prohibition on federal funds for non-Hyde abortions

Individual market QHP issuers may not use federal funds to pay for non-Hyde abortion services at any time, whether during the plan year in which the funds were collected or after. Sections 1303(b)(2)(A)(i) and (ii) of the ACA and 45 C.F.R. § 156.280(e)(1)(i) and (ii) prohibit using any amount attributable to a premium tax credit (including advance payments) or cost-sharing reductions to cover non-Hyde abortion services. Issuers must maintain sufficient funds in their non-Hyde abortion segregated accounts to pay all claims for each plan year in which they collected the premium funds, and may only draw from those segregated accounts to pay for non-Hyde abortions—reallocated funds transferred out after the plan year may not be used to cover non-Hyde abortion services.

Federal funds (including APTC and CSR amounts) cannot be used to pay for non-Hyde abortions.
Issuers may only draw from non-Hyde abortion segregated accounts to pay for non-Hyde abortion services.
Funds moved to general issuer-managed accounts after the plan year are not available to cover non-Hyde abortion services.

Key Terms and Account Types

inv-04: Non‑Hyde abortion services

DefinitionAbortion services for which federal funding is prohibited (those that do not fall under Hyde Amendment exceptions such as rape, incest, or maternal life endangerment).

Statutory referencesDefined by 42 U.S.C. § 18023(b)(1)(B)(i) and 45 C.F.R. § 156.280(d)(1) as 'non-Hyde abortion services.'

Hyde Amendment exception noteHyde Amendment permits federal funding only for abortions in cases of rape, incest, or maternal life endangerment; other abortions are non-Hyde and federal funds are prohibited.

inv-05: Section 1303 segregated accounts

Two required accountsA 'non-Hyde abortion segregated account' and a 'segregated account for all other covered services' (collectively, 'Section 1303 segregated accounts').

Collection mechanicsIssuers must collect two separate per‑enrollee monthly payments: one for AV of non‑Hyde abortion coverage (not less than $1/month) and one for all other covered services.

Deposit requirementSeparate payments must be deposited into and maintained in the respective segregated accounts.

inv-06: 'Used exclusively' (plan‑year interpretation)

'Used exclusively' applies during plan yearFunds in each segregated account must be used exclusively for their designated purpose during the plan year in which the funds were collected.

Post‑plan‑year treatmentAfter the conclusion of the plan year and after all claims for that plan year have been paid or accounted for, funds in each segregated account become earned premium revenue and may be treated like other premium payments.

RationaleStatutory language and rate‑development mechanics indicate the segregation and exclusivity requirements were intended to apply to a finite plan year rather than in perpetuity.