Friday, December 14, 2012

IRS Releases Final Regulations on Comparative Effectiveness Research Fee to Fund PCORI; Guidance on Transitional Reinsurance Fee

Client Alert

December 10, 2012

On December 5, 2012, the Internal Revenue Service ("IRS") released final regulations regarding the payment of fees by insurers and plan sponsors of group health plans to fund the Patient-Centered Outcomes Research Institute (the "Institute" or "PCORI"). The Institute was established by the Patient Protection and Affordable Care Act ("ACA") to conduct research to evaluate the effectiveness of medical treatments, procedures and other items or strategies that treat, manage, diagnose or prevent illness or injury. In order to fund the Institute, ACA imposes annual per-participant fees on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans, as further described in our client alert on the proposed regulations. The final regulations generally adopt the provisions of the proposed regulations with some changes, as discussed below.

In addition, the Department of Health and Human Services ("HHS") recently released proposed rules that provide guidance on several programs, including the Transitional Reinsurance Program, which becomes effective in 2014. While a fulsome discussion of the Transitional Reinsurance Program is beyond the scope of this alert, there is one item of particular interest to plan sponsors of self-insured group health plans. HHS estimates that the fee under the Transitional Reinsurance Program for 2014 will be $5.25 per member per month, which is $63 annually for each participant (i.e., $63 annually for each covered employee, spouse and dependent). HHS will require contributing entities (generally insurers and third party administrators) to submit enrollment information by November 15, 2014, and will notify them within a month of any contributions due, which must be paid within 30 days of such notification.

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