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PAI Self-Funded Plan Updates

Comparative Effectiveness Tax Alert

April 23, 2012

When: Policy years ending after September 30, 2012 through September 30, 2019 based on average covered lives; if the policy year is the calendar year, the fee will apply to years 2012 through 2018

Where: Established as a federal tax under the IRS, enacted in the health care reform law.

Why: To assist in making informed health decisions based on funded research

Key Information

The Patient Protection and Affordable Care Act (PPACA) established a research institute through an amendment to Title XI of the Social Security Act. The institute’s purpose is to help patients, clinicians, purchasers and policy-makers make informed health decisions. It is charged with conducting research on medical treatments, services, and drugs. Then it will produce risk and benefit outcomes that can be used in the decision-making process. Some of its funding will come from annual fees being imposed on health insurance policy lives. Stand-alone policies such as dental, vision, and long term care are not included.

Impact on Self-Funded Plan Sponsors

Starting in 2012, employers sponsoring a group health plan must pay $1 per participant. The fee increases to $2 dollars in 2013, and then to an amount indexed to national health expenditures. The comparative effectiveness fee phases out by 2019. The issuer of the policy or sponsor of the self-funded health plan pays the fee to the IRS. Please note that since this is a tax not associated with group billing or premiums, Planned Administrators, Inc. will not collect or pay this tax on behalf of self-insured plan sponsors.

Pending Regulations

The IRS and Treasury anticipate proposing regulations after they receive comments on provisions including:

• Reasonable methods to determine the average number of lives and how to account for dependents
• Exclusion of health flexible spending arrangements and certain health reimbursement arrangement (HRA) accounts
• Reporting and payment of fees quarterly or annually
• Transition rules for the first policy year or plan year in which the fee is effective
• Definition of policy year or plan year for purposes of the fee
• Guidance on applying the fee to plans covering expatriates

For More Information

Visit www.hhs.gov or contact your PAI marketing representative.