As noted in last week’s column (see The Comparative Effectiveness Fee – Part I), PPACA section 6301 established the Patient‐Centered Outcomes Research Institute (“Institute”), the Patient‐Centered Outcomes Research Trust Fund (“Trust Fund”) to fund the Institute, and new annual fees payable by health insurers and sponsors of self-insured health plans to help fund the Trust Fund.
These fees are effective for plan (or policy) years ending after September 30, 2012 and generally apply for each plan (or policy) year from 2012 through 2018 (for calendar year plans). Notice 2011‐35 (the “Notice”) requests comments on the implementation of the fee and, among other things, provides some insight regarding possible mechanics of calculating and paying the fee and possible safe harbors and other exceptions that the IRS may ultimately adopt in proposed regulations. Comments are due by September 6, 2011.
The fees payable by health insurers and sponsors of self-funded health plans are to be imposed on “specified health insurance policies” and “applicable self‐insured health plans,” respectively. Code § 4375 and the Notice broadly define “specified health insurance policy” as any accident or health insurance policy (including a policy under a group health plan) issued with respect to individuals residing in the United States.
The term also includes an arrangement under which fixed payments or premiums are received as consideration for a person’s agreement to provide or arrange for the provision of accident or health coverage to U.S. residents, regardless of how such coverage is provided or arranged to be provided. The term does not, however, include any insurance if substantially all of its coverage is for excepted benefits as described in Code § 9832(c) (e.g., stand‐alone dental and vision, specified disease or illness, hospital indemnity, accident, long‐term care coverage, or health flexible spending arrangements that meet certain requirements). The issuer of the specified health insurance policy is required to pay the fee.
Code § 4376 and the Notice broadly define “applicable self‐insured health plan” as any plan for providing accident or health coverage (not including excepted benefits as described in Code § 9832(c)) if any portion of the coverage is provided other than through an insurance policy. The plan must also be established or maintained (1) by one or more employers for the benefit of their employees or former employees, (2) by one or more employee organizations for the benefit of their members or former members, (3) jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees, (4) by a voluntary employees’ beneficiary association, (5) by any organization as described in Code § 501(c)(6), or (6) in the case of a plan not previously described, by a multiple employer welfare arrangement, a rural electric cooperative, or a rural telephone cooperative association.
The "plan sponsor" of the applicable self‐insured health plan is required to pay the fee. For this purpose, plan sponsor is defined as the employer (for a single employer plan), the employee organization (for a plan established or maintained by an employee organization), or the association, committee, joint board of trustees, cooperative, or association, as applicable.
The Notice describes the circumstances under which a health Flexible Spending Arrangement ("FSA") is considered an excepted benefit under Code § 9832(c) (i.e., where other group health plan coverage that is not limited to excepted benefits is made available to participants, and where the maximum benefit payable to any eligible participant cannot exceed two times the participant's salary reduction election (or, if greater, $500 plus the amount of the salary reduction election)). With respect to a health FSA that does not satisfy these requirements, the Notice invites comments on whether additional exceptions should be created.
The Notice also suggests that the IRS may be willing to create exceptions for certain types of Health Reimbursement Arrangements ("HRAs"), and requests comments on the types of HRAs that should be excluded. In making this determination, it notes that the IRS may consider factors such as whether the HRA provides for a limitation on annual contributions and whether other employer‐sponsored health coverage is available.
Got a health-care reform question? You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions
You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.