ACA Creates New Tax on Health Insurors and HRAs to Fund Research Government Agency

By Jamie Johnson, CFCI Compliance Director at eflexgroup

Comparative Effectiveness Fee (PCOR Fee)

Patient Protection and Affordable Care Act (PPACA) created the Patient-Centered Outcomes Research Institute (PCORI), which is charged with promoting research to evaluate and compare the health outcomes and clinical effectiveness, risks and benefits of medical treatments, services, procedures and drugs. PCORI is to be funded in part by fees assessed on health insurers and sponsors of self-insured group health plans.

Here’s what you need to know

 

  • The PCOR fee will first be assessed with respect to plan/policy years ending after September 30,

2012 (i.e. ending between October 1, 2012 and September 30, 2013).

  • The fee will be equal to $1.00 times the average number of covered lives (employees and dependents) for the first plan or policy year ending on or after October 1, 2012. The fee will be equal to $2.00 times the average number of covered lives for policy or plan years ending after September 30, 2013. For plan or policy years

beginning on or after October 1, 2013, the fee will be indexed to increases in National Health

Expenditures. The fee will not be assessed for plan years ending after September 30, 2019, which means that for a calendar-year plan, the last year of assessment is the 2018 plan year.

  • If a HRA plan sponsor has no other applicable self-insured health plans in addition to a Stand-alone HRA, the sponsor must pay the fee based on the average number of lives covered by the HRA, but counting only one life per participant.
  • If a HRA plan sponsor has other coverage, but that coverage is fully insured, the plan sponsor must pay the fee with respect to the average number of lives covered by the HRA in addition to the fees that will be paid for the insured plan. (The policy issuer is responsible for the fees on the fully insured plan.) The HRA’s covered lives will be determined using the one life per participant rule.
  • If a HRA plan sponsor has another applicable self-insured health plan with the same plan year, then each person covered by both plans is only counted once. The individuals covered by both plans are counted using the counting method for the other plan (so the one life per participant rule does not apply to them). If the HRA covers anyone who is not also covered under the other plan, the sponsor must pay the fee for those individuals using the one life per participant rule.
  • The IRS has provided four different methods to calculate the average number of covered lives under an applicable self-insured health plan:
  1. Actual Count Method. This method adds the actual covered lives on each day during the plan year and divides that sum by the total number of days in the plan year.
  2.  Snapshot Count Method. This method adds the actual covered lives on at least one designated date per quarter and divides that sum by the number of designated dates used. (So, if the first day of each quarter is used as the designated date, then the average is determined by adding the number of lives covered on the first day of each quarter and dividing by four.)
  3. Snapshot Factor Method. This method is similar to the snapshot count method, but the number of lives attributable to coverage other than self-only coverage on any date is determined by multiplying the number of participants with such coverage by a factor of 2.35
  4. Form 5500 Method. This method only applies if a Form 5500 is filed for the HRA or for the “plan” of which the HRA is a component. Under this method, the average is the sum of the total participants identified on Form 5500 at the beginning of the year and the total participants identified on Form 5500 at the end of the year, divided by 2.  When applied to a plan that has both self-only and other coverage, the average is simply the sum of the total participants identified on Form 5500 at the beginning of the plan year and the total participants identified on Form 5500 at the end of the plan year.
  • Plan sponsors must file Form 720 to report the fee by July 31 of the year following the calendar year in which the applicable plan year ended. Payment must be made with the filing.
  • The following benefits are not subject to the fee:
    • Excepted benefits, including limited-scope dental and vision plans, flexible spending accounts (FSAs);
    • Health savings accounts;
    • Employee assistance, disease management, and wellness programs that do not provide significant benefits for medical care or treatment;
    • Expatriate plans that primarily cover employees living and working outside the United States; Stop loss coverage.
    • Go to http://www.gpo.gov/fdsys/pkg/FR-2012-04-17/pdf/2012-9173.pdf for proposed regulations published by Internal Revenue Service.

 

Questions? Please email us at compliance@eflexgroup.com

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