Earlier this year, the IRS proposed regulations to address the comparative effectiveness research fees imposed on health insurers and certain self-funded group health plans under the Affordable Care Act (ACA). The ACA created both a Patient-Centered Outcomes Research Institute (PCORI) and a Patient-Centered Outcomes Research Trust Fund (PCORTF) to pay for it. The purpose of the PCORI is, through research, to improve the quality and lower the cost of health care by “advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings."The fees are to be imposed over a seven-year period on the number of covered lives under insured group and individual policies and covered lives under self-funded group health plans, beginning in plan or policy years starting on or after October 1, 2012. For the first plan or policy year (i.e., one ending between October 1, 2012 and October 1, 2013), the fee will be $1 times the number of covered lives. For the second plan or policy year (i.e., one ending between October 1, 2013 and October 1, 2014), the fee will be $2 times the number of covered lives. For plan or policy years three through seven, the fee will increase in an amount equal to the increase in the projected per capita amount of the National Health Expenditures Index that is released by the U.S. Department of Health and Human Services immediately preceding each applicable October 1. Further details about these PCORI fees -- who has to pay them, to what plans or policies they will apply, how to count the number of covered lives, and how and when the fees are to be paid -- can be found in the prior Honigman Health Care Reform Alert on May 1, 2012.
The IRS published final regulations on these PCORI fees that appeared in the Federal Register on December 6, 2012. These final regulations did not differ in significant details from the proposed regulations, but they did clarify the following:
- Individuals enrolled in a group health plan under COBRA are to be included when counting covered lives subject to the fees.
- Where an applicable self-funded group health plan provides coverage through both fully-insured and self-funded options, the plan sponsor can disregard the lives that are covered solely under the fully-insured options (as the insurer will be paying the fees for those covered lives), but the plan sponsor cannot disregard a covered life merely because that individual is also covered under another plan of that same employer.
- An individual subject to different benefit arrangements having different plan sponsors will be subject to separate fees (i.e., such plans or policies cannot be combined when calculating covered lives).
- A health reimbursement arrangement (HRA) is not subject to a separate fee if the plan sponsor also maintains a separate self-funded group health plan with the same calendar plan year; otherwise HRAs will be subject to this PCORI fee.
- The PCORI fee must be reported and paid on Form 720, “Quarterly Federal Excise Tax Return,” but the applicable penalties for late filing may be waived or abated if the issuer or plan sponsor has reasonable cause and the failure was not due to willful neglect.
Posted January 3, 2013
by Our Friends at Honigman Law