Self-insured plans, HSAs, HRAs must pay research fees

January 9, 2013

To determine what works in providing medical care, the Affordable Care Act health care reform law created the Patient-Centered Outcomes Research Institute (PCORI). For seven plan years, PCORI will be funded with fees on plan sponsors of self-insured plans, including retiree-only and COBRA plans.

Key: Sponsors of insured plans that offer employees health reimbursement arrangements (HRAs) and certain health flexible spending accounts (FSAs) must also pay fees. Final regulations implementing this provision became effective Dec. 6, 2012, and apply to plan years ending after Oct. 1, 2012, and before Oct. 1, 2019.

Heads up: Calendar year plans must begin to collect data now. (77 F.R. 72721, 12-6-12)

$1 and counting. The fee is $1 per average number of covered lives for plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2013, and $2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014. After that, the fee is adjusted.

Break: For plan years that began before July 11, 2012, and those ending on or after Oct. 1, 2012, you may determine the average number of covered lives using any reasonable method. Warning: Since the fee is imposed on plan sponsors, the Department of Labor has determined that no part of a plan’s assets can be used to pay it. The fees are payable annually on July 31 of the year following the end of the plan year, along with Form 720.

Covered lives. The final regs clarify that when figuring the average number of covered lives, you may disregard employees and dependents who participate in an insured plan, if you sponsor both an insured plan and a self-insured plan.

Similar to the proposed regs, the final regs provide four choices for determining the average number of covered lives. You must use the same method to determine the number of covered lives for a plan year, but you can use another method for the next plan year.

• Actual count method: Add the total number of covered lives for each day of the plan year and divide by the number of days in the plan year.

• Two snapshot methods: Pick a date—say, the first day of each calendar quarter—add the total covered lives on that date and divide by the number of dates on which the count is made. The final regs also make clear that the dates used for snapshots in the 2nd, 3rd and 4th quarters must be within three days of the date of your first-quarter date, and that the 30th or 31st day of a month is treated as the last day of a month.

1. For the snapshot factor method, the number of lives is the total number of participants who have self-only coverage, and those who have family coverage multiplied by 2.35.

2. For the snapshot count method, count the actual number of lives on the designated date.

• Form 5500 method: Count the number of participants you report on Form 5500. For plans offering only self-only coverage, this figure is the number of participants at the beginning and end of the plan year, divided by two. For plans that offer self-only and family coverage, this figure is the sum of the total number of participants at the beginning and end of the plan year.

Excepted benefits. The final regs confirm that fees aren’t due on excepted benefits. What are excepted benefits? Excepted benefits include employee assistance plans, disease management programs and wellness programs, as long as they don’t provide significant medical care or treatment; limited scope dental and vision plans; and specific disease or hospital/fixed indemnity plans that employees pay for with after-tax dollars and that are offered as independent, noncoordinated benefits.

FSAs and HRAs. FSAs can be offered to employees in conjunction with a self-insured or an insured plan. Regardless of how the health plan is funded, FSAs aren’t subject to the fees if they are excepted benefits—employees are offered other major medical coverage and the maximum FSA payout is limited to twice employees’ pretax contributions, or, if greater, $500 plus employees’ pretax contributions.

FSAs that aren’t considered excepted benefits, including FSAs offered by sponsors with insured plans, and all HRAs are subject to the fees.

Break: Self-insured plans don’t have to pay separate fees for FSAs and HRAs that have the same plan sponsor and the same plan year as the self-insured plan, and that are integrated into major medical coverage.

Special counting rule: If you must pay fees, you may treat each participant’s FSA or HRA as covering only one life.