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Client Alert

Health Care Reform Update: Many Self-Insured Plans Subject to New Annual Fees This Year
Authors: Mark Jones, Justin Krawitz

1/16/2013
New regulations have been issued under the Patient Protection and Affordable Care Act (“PPACA”) implementing annual fees and reporting requirements on self-insured health plans and indirectly on fully insured plans. The Internal Revenue Service (“IRS”) has finalized regulations on annual fees imposed on sponsors of self-insured plans and issuers of health insurance policies to fund the Patient-Centered Outcomes Research Trust Fund. The fee for 2013 is $1 per covered life, which must be reported and paid by July 31, 2013 for calendar-year plans. The Department of Health and Human Services (“HHS”) has issued proposed regulations that would impose additional fees on self-insured plans and health insurance issuers to fund the Transitional Reinsurance Program. HHS estimates that the initial annual contribution rate, for 2014, will be $63 per covered life.

Patient-Centered Outcomes Research Institute Fee

Background

PPACA established the Patient-Centered Outcomes Research Institute (“PCORI”) to synthesize and disseminate research relating to the comparative clinical effectiveness of various medical treatments. PCORI is to be funded in part by fees (“PCORI fees”) assessed on sponsors of self-insured health plans and issuers of health insurance policies.

PCORI fees are tied to the federal fiscal year, and they apply to plan years ending on or after October 1, 2012 and before October 1, 2019. The fee is equal to $2 ($1 for plan years ending before October 1, 2013), multiplied by the average number of employees and dependents covered by the plan (“covered lives”). For plan years ending on or after October 1, 2014, the fee is indexed to increases in projected per capita national health expenditures.

Who Pays the Fee?

PCORI fees are payable by sponsors of self-insured health plans and issuers of health insurance policies. For this purpose, the plan sponsor is generally the employer, disregarding controlled group rules. If multiple employers participate in the same plan, the fee is allocated among each employer, unless the sponsor is identified in the plan document. The regulations permit employers to amend their plans to designate one employer as the plan sponsor for PCORI fee purposes, provided that the designation is made in writing, and the designated sponsor has given its written consent, before the PCORI fee for the plan year is due. Although the PCORI fee for fully insured plans is initially imposed on the insurance issuer, the regulations do not restrict issuers from passing the fees to plan sponsors and participants in the form of higher premiums.

To read this publication in its entirety, please click the link in the adjacent "Download" section.
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