The Internal Revenue Service (IRS) has issued a final rule (pdf) addressing the fees imposed by
the Affordable Care Act on issuers of certain health insurance
policies and plan sponsors of certain self-insured health plans to
help finance the Patient-Centered Outcomes Research Institute
(PCORI), a private, nonprofit corporation whose purpose is to
"assist, through research, patients, clinicians, purchasers,
and policy-makers in making informed health decisions by advancing
the quality and relevance of evidence-based medicine through the
synthesis and dissemination of comparative clinical effectiveness
research findings." The fees described in the final rule apply
to policy and plan years ending on or after October 1, 2012, and
before October 1, 2019.
Specifically, the fees imposed on an issuer of a specified
health insurance policy and those imposed on a plan sponsor of an
applicable self-insured health plan is two dollars (one dollar in
the case of policy years ending before October 1, 2013) multiplied
by the average number of lives covered under the policy or plan.
For policy or plan years ending on or after October 1, 2014, the
fee is increased based on increases in the projected per capita
amount of National Health Expenditures. The fee is to be reported
and paid by the issuer of the policy or plan sponsor for a policy
or plan year no later than July 31 of the year following the last
day of the policy or plan year.
The regulations define a " specified health insurance
policy" as any accident or health insurance policy (including
a policy under a group health plan) issued to individuals residing
in the United States. The rule does make certain exceptions. For
example, the rule provides that a specified health insurance policy
does not include any insurance policy to the extent it provides for
an employee assistance program (EAP), disease management program,
or wellness program, if the program does not provide significant
benefits in the nature of medical care or treatment. Nor does the
term include HIPAA "excepted benefits"
A "plan sponsor" is defined as the employer in the
case of a plan established or maintained by a single employer, or
the employee organization in the case of a plan established or
maintained by an employee organization. The rule elaborates that in
the case of: (1) a plan established or maintained by two or more
employers or jointly by one or more employers and one or more
employee organizations, (2) a multiple employer welfare
arrangement, or (3) a voluntary employees' beneficiary
association, the plan sponsor is the association, committee, joint
board of trustees, or other similar group of representatives of the
parties who establish or maintain the plan.
In response to comments on the
proposed rule issued last April, the final regulations
"apply the PCORI fee to specified health insurance policies or
applicable self-insured health plans that provide accident and
health coverage to retirees, including retiree-only policies and
plans." In addition, the final regulations state explicitly
that COBRA continuation coverage must be taken into account in
determining the PCORI fee, unless the arrangement is otherwise
The final rule does not, however, adopt a commenter's
request that the fee apply only once with respect to each covered
life because doing so "would be contrary to the explicit
statutory language applying the fee to each specified health
insurance policy or applicable self-insured health plan." The
rule does allow an applicable self-insured health plan that
provides accident and health coverage through fully-insured options
and self-insured options to disregard lives that are covered solely
under the fully-insured options when calculating the PCORI fee.
The regulations include a number of examples to provide issuers
and plan sponsors with guidance on how the PCORI fee will be
calculated and applied, including those clarifying the application
of the fee to an HRA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Effective January 1, 2015, certain employers became subject to the employer mandate of the Patient Protection and Affordable Care Act, and thus subject to liability under the ACA Employer Shared Responsibility provisions.