The Affordable Care Act mandates that a fee be assessed on health insurance
issuers and plan sponsors of self-insured health plans to fund the
Patient-Centered Outcomes Research Institute. The IRS recently proposed
rules implementing the new fees. Under the proposed rules, employers
sponsoring self-insured health plans, including HRAs, are subject to the
fees. This is the case even if the HRA is integrated with a fully-insured plan.
In this scenario, both the health insurance issuer and employer would be
assessed a fee. Health FSAs qualifying as excepted benefits, stand-alone dental
and vision plans, employee assistance programs, wellness programs and health
savings accounts are excluded and not subject to the new fee. For plan years
ending on or after October 1, 2012, the fee is $1.00 multiplied by the average
number of covered lives (including dependents). The fee is increased to $2.00
for plan years ending on or after October 1, 2013 and may be further increased
thereafter based on an increase in the projected per capita amount of national
The "average number of covered lives" can be determined in one of three ways:
- (i) the number of lives covered for each day of the plan year divided by the
number of days in the plan year;
- (ii) the total lives covered on one day in each quarter divided by the sum
of the number of dates on which a count was made; or
- (iii) using the plan sponsor's Form 5500 participant counts.
Employers who sponsor self-insured plans, such as HRAs, are required to
report and pay the fee once per year on Form 720, the Quarterly Federal Excise
Tax Return. The Form must be filed by July 31 of each year for the plan year
ending in the preceding calendar year.