New Affordable Care Act Fees Impact Group Health Plans in 2013 and 2014

by BakerHostetler
Contact

On July 31, 2013, the first of various fees will be due that are imposed by the Affordable Care Act on self-insured group health plans and/or issuers of insured health policies providing accident and health coverage. Beyond the practical steps towards compliance, employers that sponsor self-insured and insured group health plans should consider these fees and their cumulative effect as an important part of their Affordable Care Act compliance analysis and strategy.

The first fee is commonly called the "PCORI fee" or the "Section 4376 fee" and is intended to partially fund the Patient-Centered Outcomes Research Institute that was founded as a result of the Affordable Care Act. The PCORI fee is applicable to plan years ending on or after October 1, 2012, and extends through plan years ending before October 1, 2019. The fee must be paid no later than July 31 of the year following the last day of the policy or plan year. Therefore, the first PCORI fee is due for 2012 calendar year self-insured plans and certain fiscal year plans by July 31, 2013.

As applied to self-insured group health plans, the PCORI fee for the first year (for plan years ending on or after October 1, 2012 and before October 1, 2013) is equal to $1.00 multiplied by the average number of covered lives in the group health plan. The PCORI fee for the second year will increase to $2.00 times the average number of covered lives in the group health plan and is indexed for increases in national health expenditures for the following years. The number of covered lives on which the fee is based generally includes active employees, former employees and COBRA-qualifying beneficiaries, as explained in the final regulations issued December 6, 2012.

Sponsors of self-insured health plans must report and pay the PCORI fee to the IRS on Form 720 -- Quarterly Federal Excise Tax Return. The PCORI regulations directly prohibit using "third-party reporting" arrangements, as is otherwise permitted in the context of the payment of payroll taxes. Sponsors of self-insured health plans should not delay compliance preparations until the IRS Form 720 is revised to accommodate the PCORI fee. It is unlikely that the fee deadline will be delayed for lack of a revised form.

Thus, employers that sponsor self-insured calendar year group health plans should be taking steps now to prepare to comply with the PCORI fee payment deadlines in July 2013. Sponsors of insured health plans, while not directly liable for payment of the PCORI fee, will likely see an indirect effect as the cost is passed down by insurance issuers.

Other Fees Coming in 2014

From 2014 to 2016, self-insured major medical plan sponsors and health insurance issuers will be responsible for paying a reinsurance program fee to the U.S. Department of Health and Human Services (HHS). The reinsurance program fee is intended to support temporary reinsurance programs for the state individual insurance markets. The amount of the fee or the contribution rate to be paid by self-insured plans and health insurance issuers will be based upon an annual uniform national contribution rate set by HHS. Current HHS guidance indicates that the reinsurance fee will be approximately $63 per covered life.

In addition, starting in 2014, health insurance issuers will be required to pay an annual fee based on their market share of the United States health insurance business.

While these two 2014 fees are not directly imposed on insured health plans, employers that sponsor group health plans can expect health insurance issuers to pass down the cost, thus impacting the overall cost of the provision of insured health care coverage of employees.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© BakerHostetler | Attorney Advertising

Written by:

BakerHostetler
Contact
more
less

BakerHostetler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.