Understanding Employee Benefits

IRS Issues Guidance on New Health Care Reform Fee

By | April 23, 2012

Under the Patient Protection and Affordable Care Act (PPACA) issuers of certain health insurance policies and plan sponsors of certain self-funded health plans must pay a fee to fund a Patient-Centered Outcomes Research Trust Fund. This trust fund will be used to allow the Patient-Centered Outcomes Research Institute to conduct research on the clinical effectiveness of drugs and therapies. The fee is based on the average number of lives covered under insurance policies and health plans and applies with respect to insurance policies and health plans with fiscal years that end between October 1, 2012 and September 30, 2019. The fee is $1.00 per covered life for years ending between October 1, 2012 and September 30, 2013; $2.00 for years ending between October 1, 2013 and September 30, 2014; and an amount for future years based upon the increase in health care expenditures as determined by the Department of Health and Human Services.

Insurance companies and employers have been wondering how to calculate this fee, particularly since it applies with respect to policies and plan years that began after October 1, 2011, including calendar year plans. On Tuesday, April 17, 2012, the IRS published proposed regulations addressing a number of issues relating to this fee. Employers and issuers can rely on these proposed regulations until final regulations are issued. Over the next few days, I will post blogs describing the regulations.

Contact Benefits Notes for more information.