Source: hr3590.com
Employer sponsors of health plans must count members in retiree-only plans and COBRA-eligible plans for purposes of paying into health reform’s Patient-Centered Outcomes Research Institute. Furthermore, employees covered under two or more “specified” policies can be counted (and taxed) more than once.
The IRS final rule on employer payment of PCORI fees disregarded employer requests to exclude retiree-only plan members, COBRA enrollees and to limit the tax to one per employee. The final rule contains few changes from the April 2012 proposed rules and Notice 2011-35, which the IRS released in June 2011.
The IRS rule was issued on Dec. 6, 2012, but its effective date is Oct. 1, 2012. Therefore, plans with plan years that started after Oct. 1, 2012 can use an alternative calculation method during the first year, the IRS rule provides. Plans that have calendar plan years can start counting on Jan. 1, 2013.
PCORI fees start at $1 per plan-covered life for plan years starting on or after Oct. 1, 2012. They double to $2 for plan years starting on or after Oct. 1, 2013. From the $2 level they increase in step with health inflation until they sunset for plan years starting after Oct. 1, 2019.
Plan sponsors and insurers must report and pay the PCORI fee no later than July 31 of the calendar year after the last day of the policy or plan year, the final rule says.
No Exception for Retiree-only Plans
The rule provides no exception for participants in retiree-only health plans when calculating the fee. The final rule applies the PCORI fee to retiree-only insurance policies and self-insured health plans, even though retiree-only employer sponsored coverage is exempt from HIPAA’s portability, nondiscrimination and related requirements.
Similarly, the rule explicitly states that COBRA qualified beneficiaries must be included when employers calculate the fees they pay.
Individuals Can Be Counted More Than Once
Commenters to the proposed rule requested that the fee apply only once per covered life and not multiple times if coverage is provided to one individual through more than one policy or self-insured arrangement; for example, a fully insured insurance policy and a self-insured drug plan. The IRS rejected this proposal, saying in the final regulations that such a provision is contrary to the explicit statutory language applying the fee to each specified policy or plan. So if a beneficiary is covered by an insured major medical plan and by a self-funded health reimbursement arrangement, for instance, he or she will be counted twice when calculating the fee.
Here’s an overview of plans that are subject to the PCORI fee
Employees in these plans must be counted when calculating the fee
• Health plans
• Prescription drug plans
• Health reimbursement arrangements
• Retiree-only health plans
• COBRA-qualified beneficiaries
Employees in these plans are exempt from the fee:
• Employee assistance programs, wellness programs and disease management programs that do not provide significant health benefits
• Most flexible spending accounts
• Health savings accounts
• Separately insured dental or vision plans
• Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions
• Expatriate coverage for employees who work and reside outside of the United States
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