Health insurance carriers and sponsors of self-funded group health plans will soon be subject to an annual patient-centered research fee, according to Section 6301 of the Patient Protection and Affordable Care Act (PPACA).
Created to fund the newly-established Patient-Centered Outcomes Research Institute, whose mission is to engage comparative clinical effectiveness research that can then be used by patients, clinicians, consumers and policy-makers to make informed health decisions, the fee will be imposed from plan years 2012 through 2019 as follows:
- 2012 Plan Year (policies ending on or after October 1, 2012): $1 x the average number of covered lives
- 2013 Plan Year (policies ending after September 30, 2013): $2 x the average number of covered lives
- 2014 – 2019 Plan Years: Due to expected increases in National Health Expenditures, the per-annum fee for these plan years has not yet been determined.
Reporting and Payment Requirements for Patient-Centered Outcomes Research Fees
The first annual reporting and payment – which covers the 2012 plan year – is due July 31, 2013. Subsequent annual filings hold the same due date through July 31, 2020.
For traditionally-insured health plans, the annual fee must be reported and paid by the insurance carrier. For self-insured plans, however, the fee must be reported and paid for by the plan sponsor (which, in most cases, is the employer).
But what about multiple plans, you ask? Fear not, as the IRS has already considered that:
- Dual Insured and Self-Insured Coverage: If your company sponsors both a traditionally-insured plan and a self-insured plan (i.e. an HRA) for the same employee pool, this would result in two separate and distinct fee and filing requirements:
- Your insurance carrier would be subject to the fee and filing requirements for the employees covered under the traditional medical policy; and
- You – as the employer – would be subject to a separate fee and filing requirement for the employees covered under the self-insured HRA.
- Dual Self-Insured Plans: Now let’s say you sponsor more than one self-insured plan, such as a medical plan and an HRA, for your employees. If those two – or more – plans have the same plan year, then all of those self-insured plans will be treated as a single plan – and subject to a single fee and filing requirement.
In all scenarios, the payment must be accompanied by IRS Form 720.
No Delegation of Duty for Self-Insured Plans
Here’s the kicker: per federal regulations, the duty to report and pay the fees attached to any self-insured plan falls to you, the plan sponsor. Plan sponsors are not permitted to delegate their reporting or payment obligations to third-parties.
Fee Amount Methodology for Self-Insured Plans
While we regrettably can’t take on the fee and filing requirements for our clients with self-insured plans, we’re more than happy to share any and all fee amount methodology options that the IRS offers. To that end, remember that the fee amount is based on the ‘average number of lives’ covered under the plan for each relevant plan year.
The IRS’ proposed regulations allow you, the employer, to choose from three different methods to determine the average number of covered lives:
- Actual Count Method. Using this methodology, you would determine the average number of lives by calculating the sum of the lives covered for each day of the plan year, then dividing that sum by the number of days in the plan year.
- Snapshot Method. With the Snapshot Method, you would add the total number of lives covered on one day in each quarter – thereby adding four sums – and dividing that total by four.
Note: For both the Actual Count and Snapshot Methods, the number of lives covered under a plan on a specific date may be determined on one of the two following options:
- The actual number of lives covered on the date; or
- The sum of (i) the number of participants with self-only coverage on the date, plus (ii) the number of participants with coverage other than self-only coverage on the date multiplied by 2.35.
The actual number of lives covered on the date; or
Form 5500 Method. The simplest and most straightforward of all three options, Form 5500’s methodology is as follows:
- For a self-insured plan that offers dependent (i.e. child, spouse, and family) coverage, the average number of lives is equal to the sum of the number of participants reported for the beginning of the plan year + the sum of the number reported for the end of the plan year.
- For a self-insured plan that only offers single (‘employee only’) coverage, the average number of covered lives is equal to the sum of the total participants at the beginning and at the end of the plan year divided by 2.
Concerned about which methodology to choose? Fret not – the IRS plan sponsors to change methods from one plan year to the next.
Exemptions from Patient-Centered Outcomes Research Fees
While the majority of traditionally-insured and self-insured health plans – including HRAs – are subject to Section 6301 of the Patient Protection and Affordable Care Act (PPACA), the following types of plans are exempt from this fee and filing requirement:
- Insurance plans that principally cover employees who are working and residing outside of the United States (i.e., expatriate policies)
- “Excepted” dental and vision care plans (i.e., stand-alone dental or vision insurance policies or self-insured benefits that require a separate election and employee contribution)
- Health care FSAs that qualify as “excepted benefits” (i.e., FSAs for which an employer contribution is not made)
- Health Savings Accounts (“HSAs”)
- Employee Assistance Plans
If you have questions regarding PPACA’s Patient-Centered Outcomes Research Fees or any other matter, feel free to contact GSA at 1-800-250-2741, ext. 170 or via email at Solutions@gsanational.com.
Please note that the information contained on this website is provided as an
informational service to our clients and does not constitute legal advice.