PPACA section 6301 amended Title XI of the Social Security Act to establish the Patient‐Centered Outcomes Research Institute (PCORI), which is generally tasked with conducting research to evaluate and compare the clinical effectiveness, risks and benefits of various medical treatments, services, procedures, drugs, and other strategies that treat, manage, diagnose or prevent illness or injury. See "SECOND OPINIONS: Comparative Effectiveness Fees - Part I."
PPACA also amended the Internal Revenue Code (Code) to create the Patient‐Centered Outcomes Research Trust Fund (Trust Fund) (new Code § 9511) to fund the Institute, and to impose new annual fees on health insurers and sponsors of self-insured health plans to help fund the Trust Fund (new Code §§ 4375-4377). These fees are effective for policy or plan years ending on or after October 1, 2012, and before October 1, 2019.
On April 17, 2012, the IRS published a proposed regulation on the implementation of the PCORI fee (Fees on Health Insurance Policies and Self-Insured Plans for the Patient-Centered Outcomes Research Trust Fund; 77 Fed. Reg. 22,691) (Proposed Regulation). The Proposed Regulation generally provides guidance on the plans and policies to which the fees apply, as well as the mechanics of calculating and paying the fees.
How is the fee calculated?
In general, sponsors of self-insured plans subject to the fee may use one of three alternative methods to determine the average number of covered lives for purposes of calculating the fee: the actual count method, which is generally based on the lives covered for each day of the plan year; the snapshot method, which is generally based on the lives covered on one day during each quarter of the plan year; or the Form 5500 method, which is generally based on the number of participants as of the beginning and end of the plan year as reported on the sponsor's Form 5500. Insurers that have issued a "specified health insurance policy" generally may use the actual count method or snapshot method (but not the Form 5500 method), or one of two other alternative methods: the member months method, which is generally based on information reported on the National Association of Insurance Commissioners (NAIC) Supplemental Health Care Exhibit; or the state form method, which is available to an insurer that is not required to file an NAIC Supplemental Health Care Exhibit and is generally based on information that is filed with the insurer's state insurance department.