Can sponsors use the reimbursement to pay increased administrative costs generally related to the administration of the plan?
Generally, no. We interpret the statutory and regulatory prohibition on using program funds as general revenue to mean that a sponsor, to the extent it is using program funds for its own purposes, must use them only to offset increases in health benefit costs or increases in health benefit premiums. The term “health benefits” is defined in Section 149.2. Based on this interpretation, a sponsor should not use program funds to offset increases in its administrative costs relating to maintenance of its plan(s) generally, as such costs are not health benefit costs nor are they health benefit premiums. One exception, however, arises when all three of the following circumstances apply: (1) A sponsor maintains an insured plan, (2) The premium it pays the insurer for health benefits includes administrative costs, and (3) The insurer does not quantify for the sponsor the portion of the premium that is allocated to such costs. When all three of these circumstances exist, the sponsor can use prog
