PCORI 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. 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 fees (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.
Below we answer some of the most frequently asked questions we have received regarding the fees.
What is the base amount of the fees?
For the first year the fee is assessed (i.e., policy and plan years ending on or after October 1, 2012 and before October 1, 2013), the fee is one dollar multiplied by the average number of covered lives. For the second assessment year (i.e., policy and plan years ending on after October 1, 2013 and before October 1, 2014), the fee increases to two dollars multiplied by the average number of covered lives. In later years, the fee is indexed according to the increase in per capita national health expenditures as determined by the Department of Health and Human Services.
What health insurers are subject to the fee?
In general, the fee on insurers applies to insurers that issue a “specified health insurance policy.”The term “specified health insurance policy” is broadly defined in part 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 does not, however, include any insurance policy if substantially all of its coverage is of excepted benefits as described in Code § 9832(c) (e.g., a stand‐alone dental or vision policy), any group policy issued to an employer that is designed and issued specifically to cover primarily employees who are working outside of the U.S., or any stop loss or indemnity reinsurance policy as defined in the Proposed Regulation.
What plan sponsors of self-insured health plans are subject to the fee?
In general, the fee on self-insured plans applies to plan sponsors of an "applicable self-insured plan."
The term "applicable self‐insured health plan" is broadly defined in part as a plan that provides accident or health coverage if any portion of the coverage is provided other than through an insurance policy and the plan is established or maintained by one or more employers for their employees or former employees (or by certain other specified organizations). The term does not, however, include a plan that provides benefits substantially all of which are excepted benefits as described in Code § 9832(c) (e.g., a health FSA that meet certain requirements), or 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.
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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.