Health Care Reform: The Affordable Care Act (PPACA) – IRS designing health plan "quality research fee"
Posted June 15, 2011 by admin
The IRS (Internal Revenue Service) would like your comments. They’d like to know how they should use the fees that health insurers and self-funded health plans (through their plan sponsors) will pay for “comparative clinical effectiveness research.”
IRS Notice 2011-35 was published with a request for comments, which are due by September 6, 2011. This notice is how the IRS is implementing Section 6301 of PPACA (the Patient Protection and Affordable Care Act of 2010). PPACA Section 6301 added Section 9511 – a provision creating a Patient-Centered Outcomes Research Trust Fund — to the Internal Revenue Code (IRC) to provide funding for a new Patient-Centered Outcomes Research Institute. The institute’s purpose is to help government, employers, consumers and private insurers determine which treatment/procedures offer good value for their cost. [PPACA Section 6301 also added sections 4375, 4376 and 4377 to the Internal Revenue].
The Notice describes that the fees are based on the average number of lives covered under the policy or plan. (See details about PPACA’s Section 6301 which also added sections 4375-7 to the Internal Revenue Code).
These fees will take effect for policy/plan years ending after September 30, 2012 and the fee sunsets in 2019 (for plans ending after 09/30/2019). For example, a calendar-year-plan, the fee would apply to plan years 2012 through 2018, and would be equal to $2 times the average number of covered lives under the plan ($1 in the case of plan years ending before 10/01/2013). These fees are to be paid annually. The $2 fee will be indexed according to the national health care inflation rate.
The new IRC sections defines “plan sponsor” to include employers who sponsor an established plan (or start/begin a new plan) and an association, board or other entity that runs a multiple employment welfare arrangement (MEWA), a voluntary employees’ beneficiary association (VEBA), or other types of plans run by two or more employers. These fees are essentially assessed as if they were taxes – IRS officials state, in the notice, that “Section 4377(c) provides that, for purposes of subtitle F of the Code, the fees imposed by §§ 4375 and 4376 are treated as if they were taxes.”
Officials are asking if they should create an “average lives covered” safe harbor for insurers that report that statistic on the supplemental reporting form developed by the National Association of Insurance Commissioners, Kansas City, Mo.
Officials also are asking how they should apply, or not apply, the requirement to HRAs (Health Reimbursement Arrangements – consider those employer/Plan Sponsors that offer an HDHP (High-Deductible Health Plan) with an HRA – they will already pay the fee for the HDHP, so why should they pay again for the HRA?), what kind of transitional rules they should offer, and whether more guidance about the terms “policy year” and “plan year” is needed.
The public comment period closes on September 6, 2011. If you would like to comment, there are detailed instructions on pages 13 and 14 of the linked notice about “how” you can submit your comments.
Links: IRS Notice 2011-35