In April, the Internal Revenue Service issued proposed regulations on collecting fees from health insurance issuers and self-insured group health plan sponsors for establishing the Patient-Centered Outcomes Research Trust Fund, as required under the Patient Protection and Affordable Care Act. The fund provides funding for a new Patient-Centered Outcomes Research Institute. PPACA requires the Institute to conduct research to evaluate and compare health outcomes and the clinical effectiveness, risks, and benefits of medical treatments, services, procedures, drugs and other strategies or items that treat, manage, diagnose or prevent illness or injury.
According to the proposed regulations, the fees will be applicable for policy and plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. For calendar year policies and plans, the fees will apply to the 2012 through 2018 policy or plan years.
For plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2013, the applicable dollar amount is $1 for each covered life. For plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014, the applicable dollar amount is $2 for each covered life. For any plan year ending on or after Oct. 1, 2014, the dollar amount is increased according to data in the most recent edition of the National Health Expenditures released by the Department of Health and Human Services. The proposed regulations include methods for issuers and plan sponsors to determine the average number of covered lives, which depend upon whether the plan is fully insured or self-insured.
Who pays the fees
Generally, for fully insured plans, the health insurance issuer underwriting the policy is responsible for paying the fees. For self-insured plans, the plan sponsor is responsible for paying the fees.
Under PPACA, fees for the fund apply to "specified health insurance policies" and "applicable self-insured health plans." The fees apply regardless of grandfathered status.
A "specified health insurance policy" is any accident or health insurance policy (including a group health plan policy) issued with respect to individuals residing in the U.S. The definition of "specified health insurance policy" excludes insurance policies providing coverage for excepted benefits, such as dental-only and vision-only policies.
An "applicable self-insured health plan" is any plan providing accident or health coverage if any portion of the coverage is provided other than through an insurance policy, and the plan is established or maintained:
* By one or more employers for the benefit of their employees or former employees.
* By one or more employee organizations for the benefit of their members or former members.
* Jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees,
* By a voluntary employees' beneficiary association.
* By any organization described in section 501(c)(6) of the Internal Revenue Code.
* By a multiple employer welfare arrangement, a rural electric cooperative, or a rural telephone cooperative association.
The definition of "applicable self-insured health plan" includes retiree-only plans. In addition, health flexible spending accounts and health reimbursement arrangements are subject to the fee requirements, although plan sponsors may only have to pay a single fee for certain integrated arrangements.
Insurance carriers and self-insured group health plan sponsors should prepare to pay the fees applicable to the 2012 policy or plan year; these will be due by July 31, 2013.
Contributing Editor Kate Bongiovanni is an associate in the tax section of Smith, Gambrell & Russell, LLP. She practices in employee benefits law and can be reached at kbongiovanni@sgrlaw.com.
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11 Comments
Posted by: Gae E | July 11, 2012 7:54 AM
I did not realize nor can I find anything that states the FSA - flexible spending accounts are subject to the fees?The definition of "applicable self-insured health plan" includes retiree-only plans. In addition, health flexible spending accounts and health reimbursement arrangements are subject to the fee requirements, although plan sponsors may only have to pay a single fee for certain integrated arrangements.
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Posted by: KEW | July 5, 2012 1:07 PM
I agree with Mary S. - this provision is what is going to save money in the long term. There is too much regional and national variation in treatment of the same condition in the same demographic, with no measurable difference in outcomes. Dartmouth University started documenting these variations decades ago. As long as the legal standard is "community standard of care" and as long as medical school teaching is not standardized, providers will be pressured to treat the same way as those around them, no matter what the science says. It is well past time that we break this connection, for the patient's good.
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Posted by: Hospitalguy | July 5, 2012 8:27 AM
BCzedoPPACA is simply bad policy and bad law. It was rushed through Congress and was intended to get itself intrenched in our systems so it could never be removed. It is a classic example of government gone wild and an attempt to control the people, not help them. There are so many provisions in PPACA unrelated to Healthcare that it is shameful.Sure there are some good things in PPACA, but if something is 25% good and 75% bad it needs to be thrown out. PPACA should be replaced with something that makes sense, is simpler and will actually be affordable. Here is what PPACA will actually accomplish: 1. Add unnecessary administrative burden to the entire economy. 2. Create yet another unsustainable entitlement that will bankrupt our country. 3. Create an environment where Healthcare serves the goverment and in the process becomes less effective. 4. Will take all healthcare and make it mediocre. Employers will cut benefits to employees to comply. The law actually forces that. Everyone will lose. 5. Make healthcare coverage more expensive because it will cover those who do not need it. Case in point, 26 year olds who are employed, have access to other healthcare coverage and are married can sign up for Mom and Dad's health insurance. This cretes a culture of dependency and weakness in people. 6. Will take us down the failed road Europe has been on for decades. Our current Administration sees the European model, knows it as failed and decides to set that as a goal. 7. PPACA is a vote buying law. That bothers me a great deal. But that is what happens in Congress these days. Pay for everything, don't require accountability and you have a vote for life.
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Posted by: dogbonez | July 3, 2012 5:57 PM
Insurance plans have been required by NCQA to report certain outcomes for several years. It is time for all insurance plans and provinces to measure functional health outcomes. The public needs to learn if a procedure does not improve their functional health it should not be paid fro. My guess is that most of the responders here have never used the SF-36+d! Our health care system is not very good (27th) and very costly. Just maybe we can get better.
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Posted by: Jed from NY | July 3, 2012 5:40 PM
Let me start by observing that I am more than a fan of the Medical Home Model of Primary care (aka Patient Centered Medical Home). My organization has taken nearly 20 practices through the process of NCQA Recognition and teaches employers how to identify and work with such high performing primary care. However, I agree with those who reject the notion that fully insured and self-funded employers need to be "taxed" to create yet another highly inefficient "quasi-government" program to study something that can't possibly be studied in the aggregate. Those who pay for care should be left alone to determine the "value" of the Medical Home Model of Primary Care. I agree with my friends above who describe this as yet another government controlled "slush fund" designed to "reward" organizations who will tell the government what they want to hear. By allowing a more simple "accountability driven" approach, those who sponsor benefits can issue their own value and quality reports to help identify what high performing primary care really looks like. Local communities can then learn from those reports what type of on-going investment in primary care is both necessary and appropriate. We have already witnessed an incredible "government run" boondoggle - health information exchange development. We as tax payers have spent billions of dollars creating high speed internet pipelines to nowhere through the creation of "quasi-government" health information technology firms known as Regional Health Information Organizations (RHIOs). In some communities these "protected entities" charged end users outrageous fees for services of no value to those who pay for care. What I consider "RHIO Racketeering". Tony Soparano couldn't have devised a better scheme. Now that these entities are in place, many of them are being "sustained" not by the value they bring, but by a "tax" on each hospital stay that employers and publicly funded programs have to bear. This surcharge is "buried" in the payment methodology between the payer and the hospital. The hospital, in turn, has to forward that surcharge amount to their "local" RHIO.There are a lot of terrific elements in the Patient Protection and Affordable Care Act - first dollar coverage for true preventive care and promotion of the Medical Home Model of Primary care - but this tax, ultimately on all of us, is not one of them.
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Posted by: Peter M | July 3, 2012 3:34 PM
I agree with Mary S. The studies are necessary. While any new tax or fee is not desirable, the funds for comparative effectiveness studies have to come from somewhere. The $1 annual fee is negligible compared to the average annual health care cost per employee of $5,429 (single coverage)/ $15,073 (family coverage). Better information will lead to lower costs by reducing waist and improving quality. Is there a better way?
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Posted by: GM-Plano | July 3, 2012 3:20 PM
Another tax, another agency and another study is not an activity, or a plan towards reducing health care costs. 75-95% of health costs are attributed to LIFESTYLE choices. This means that our health issues are very preventable; and, as a nation we should be focused on prevention. Starting with the following small steps will go a long way towards a healthier America and lower health costs: 1) drastically reducing sugar, corn syrup, salt and fat from our meals: 2) at least 30 minutes of physical activity four times weekly; 3) targeting BMI (body mass index) to less than 25%; 4) teaching our children about the importance of physical activity outside of typing on Facebook by requiring physical activity at all grade levels through graduation; 5) teaching our children about nutrition by instituting ANNUAL nutritional education as part of all grade levels including junior and senior high school curriculum for graduation credits; 6) having the entire family take thorough annual wellness exams; and 7) taking medications as the doctor prescribed. This is really NOT rocket science!!!
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Posted by: Benjamin B | July 3, 2012 3:18 PM
Danial B would do well to understand the Health Care Reform Act (Obamacare) now that most of the key elements have been upheld by SCOTUS. There never was a provision for "death panels"; it was a figment of Betsy McCaughy's pronounced "McCoy") imagination first publicized during her interview with Fred Thompson in the early stages of the debate on this massive bill. Then Sarah Palin, the intellectual of the political right, took this erroneous factoid and ran with it.However, they and many others opposed to the bill got it all wrong. The provision that Ms. McCoughy referenced in the PPACA bill actually called for physicians to be reimbused by Medicare for their office time discussing end-of-life options with their senior patients. Such conferences were and still are not covered by Medicare. Patients, perhaps with a trusted family member or friend, were encouraged to make decisions about the extent of care in their final days or months, when they may no longer be able to make decisions for themselves. They could opt for heroic measures to be kept alive, elect for little or no intrusive end-of-life treatment or some level of care falling within this spectrum. While still healthy and independent, hopefully each patient would reduce his/her wishes to writing to make doctors and family members aware of their preferences. There was so much controversy about this provision, most of it ill-advised, that it was removed from the final version of the reform bill. These conferences between physicians and their elderly patients are being conducted daily by many medical providers even without insurance payment. Perhaps in the not too distant future this too will be corrected.
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Posted by: LarrySteinberg | July 3, 2012 2:41 PM
Does anyone believe the Patient-Centered Outcomes Research Trust Fund will actually do work that will lead to substantive cost savings, or will it just be another slush fund for political appointees to make big money while coming up with politically biased research to support more expansion of government? Obviously, I believe the latter.
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Posted by: Mary S | July 3, 2012 2:23 PM
Comparative effectiveness research is a one of the provisions of the Act that is designed to truly reduce healthcare costs, by determining which medical procedures are most effective to achieve the desired outcome, and not just to generate revenues for the providers. This is the type of reform our healthcare system desperately needs. We cannot maintain the status quo and continue to fund medical tests and procedures that are costly and ineffective. The other provisions in the Act that are designed to actually reduce healthcare costs are preventive care and programs to promote and improve healthy lifestyles. We need to get at the root of the problem!
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Posted by: Daniel B | July 3, 2012 2:08 PM
Another in a long line of destructive taxes. The only unique thing about this one is that it is at the discretion of the IRS (sick) and begins funding 'death panels' which so many sneered at. Welcome to the brave new world of Obamacare!
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