The first of such fees will be due by July 31, 2013! This is the Patient-Centered Outcomes Research Institute Fee or PCORI fee. This fee will have to be paid for by most plans including insured and self-insured regardless of whether the plan is grandfathered or not. Non-profits, retiree only, and governmental entities are subject to the fee as well. The fee is for "comparative effectiveness research" as required under ObamaCare.
The PCORI fee starts at $1 per "covered life" (employee, spouse and dependents) and goes to $2 in 2014 and then is indexed for the remaining five years. It is important to note that it is assessed on covered lives not just covered employees; however the fee only applies to those individuals living in the U.S. The regulations outline several ways to count covered lives depending on whether the plan is insured or self-insured.
Fee requirements
For self-insured plans, a fee is imposed on plans for each plan year ending on or after October 1, 2012 and before October 1, 2019. For calendar year plans, the first plan year ending on or after October 1, 2012, will be the 2012 plan year, which ends on December 31, 2012. For insured plans the same applies, only with respect to policy years rather than plan years. For calendar year plans the first PCORI fee will be due July 31, 2013, and is reported on IRS Form 720, the Quarterly Federal Excise Tax Return. The fee applies to group health plans, regardless of grandfathered status. Who pays the fee? For insured plans the fee is paid by the insurer (this may translate to higher rate hikes). For self-insured plans the fee is paid by the plan sponsor. In the case of a single-employer plan, the plan sponsor is the employer.
What about Flex Plans?
Most Cafeteria Plan Health FSAs are exempt. The one exception is for plans where there is an employer contribution of more that $500 per year. If the fee does apply to a Health FSA, the final regulations provide for a special rule limiting the covered lives to just the participant, ignoring spouse and dependents whose expenses may be eligible for reimbursement under the FSA.
HRAs are more complex: A stand-alone HRA (an HRA that is not linked to group health coverage) is subject to the PCORI fee. For example, a premium only HRA, such as some HRAs offered to Medicare-eligible retirees, would be subject to the PCORI fee. An HRA linked to a self-insured health plan that provides major medical coverage (PPO, HMO) is not subject to a separate fee. Multiple self-insured arrangements maintained by the same plan sponsor and with the same plan year are subject to a single PCORI fee. However, if an employer provides a self-insured HRA in conjunction with an insured group health plan (as many do), then the self-insured employer plan sponsor will be subject to the fee with respect to covered lives under the self-insured HRA. The insurer of the group insurance policy will be subject to the fee in connection with covered lines under the group health policy, even though the HRA and the insured group health plan are maintained by the same plan sponsor.
In addition to the PCORI fee, employers will soon be faced with the Temporary Reinsurance Program fee beginning in 2014.
This fee is paid by group health plans during 2014, 2015 and 2016. The expressed purpose of this fee is to establish a reinsurance pool for insurers in the individual health insurance market. The goal is to lessen the risk for insurers due to guaranteed insurability of insurance in this market beginning in 2014. IRS proposed regulations issued in December 2012 estimate the fee for 2014 will be $63 for each person covered by a group health plan-again this includes spouses and dependents who participate in the plan. The exact amount will be determined by HHS (Health and Human Services) later in 2014 when they can better determine covered lives for that year.
Who pays the fee?
Again, for insured plans the insurer will pay the fee; however, I feel that it is unrealistic to think that this will not be passed on to the employer/employees. For self-insured plans the fee is owed by the plan sponsor, which is the employer except for collective bargained plans. The fee will be collected on a calendar year basis, regardless of the plan year for the group health plan. The covered entity must provide information to HHS by November 15th on the number of covered lives during the plan year; HHS will then send an invoice within 15 days of submission or by December 15th, whichever date is later. The fee is payable within 30 days after receipt of the invoice. A small consolation is that the fee is tax deductible.
What about Flex Plans?
I am happy to say here our voices have been heard. Health
FSAs are exempt (even those that are not an excepted benefit-employer funded); HSAs are exempt; HRAs that are integrated with a group health plan (no exclusion so far for fully insured) are exempt; in addition other benefit plans such as: stand alone vision and dental plans, stand-alone prescription drug plans, most employee assistance programs, hospital indemnity coverage, and stop loss insurance are also exempt.
The above information is submitted as a short introduction to these fees (a heads up) only and Pacific Benefits accepts no responsibility for the accuracy of the information and does not give legal advice. All clients are advised to pursue this with their insurance advisors and legal counsel.
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