Hello Valued Customer,
As you probably know, the 2016 Funding year was the first time the Rural Health Care Program received funding requests in excess of the $400 Million funding cap. This caused USAC to implement a Pro-rata Factor, which resulted in an across-the-board reduction of committed funds to all applicants that submitted a funding request in the September-November filing window. USAC's news post describing this and illustrating how the Pro-rata Factor is calculated is available here.
The Pro-rata Factor used for that period was 92.5%. This means applicants that were impacted by the Pro-rata Factor in the 2016 Funding Year were subject to a 7.5% reduction in the amount of approved funding they will receive. It is widely anticipated that future funding years may be subject to a Pro-rata Factor, and that subsequent year Pro-rata Factors might result in funding reductions larger than the 7.5% experienced in 2016. Implementing a Pro-rata Factor is a USAC requirement when funding requests exceed the annual funding cap. Unfortunately, there's nothing RHC Program applicants or telecommunications service providers can do to influence whether a Pro-rata Factor is implemented and, if so, at what level it is set.
However, TeleQuality does offer a unique payment option for qualifying customers in the form of a Copay. This was developed as a way to recognize and respond to the needs of our healthcare customers who may have a difficult time paying the entire Monthly Recurring Cost of their telecommunications services while USAC evaluates and approves funding requests. Part of the Copay Addendum that sets up this payment method explains the need to reconcile any balance or credit amount based on the Copay amount and the funded amount, which is done annually after funding has been received.
Because of the way the Copay amount and any Pro-rata Factor that USAC may set would interact, it's possible that a customer might have a large outstanding account balance after reconciliation occurs. While we cannot control USAC's use or level of a Pro-rata Factor, we can control the Copay arrangement to help smooth its impact and make customer budgeting more predictable and manageable. In order to do this, TeleQuality has improved the Copay calculation formula to account for the possible use of a Pro-rata Factor and mitigate large, unexpected customer balances that must be paid in a lump-sum at the end of the year.
The 2016 Funding Year Pro-rata Factor was 92.5%. Beginning with next month's billing period, TeleQuality will offer 3 different Copay options, which are briefly explained below. Along with your August invoice, you will receive a more detailed chart that shows how each option would impact the Copay amount and possible reconciliation account balance. Your organization’s copayment statements will not change on your billing until your organization has communicated to us which option you select.
For additional information or questions, please contact your TeleQuality Customer Relationship Manager.