Employer Health Reform Issues Brief: Patient-Centered Outcomes Research Fee
Smart first steps
Issuers of health insurance policies to group health plans and sponsors of self-insured group health plans must pay an annual patient-centered outcomes research fee. The fee is imposed for a limited number of years, generally beginning in 2012 and ending in 2019 for calendar year plans.
The fee amount is $1 times the average number of covered lives under the plan for policy years or plan years (in the case of self-insured plans) ending during the 2013 fiscal year (i.e., October 1, 2012 through September 30, 2013). For subsequent plan or policy years the fee amount is $2 times the average number of covered lives under the plan, subject to adjustment for projected increases in National Health Expenditures. The Centers for Medicare and Medicaid Services, Office of the Actuary has projected that National Health Expenditures will increase 6.6%-7.0% per year for 2013-2019.
Note that “covered lives” includes all participants and beneficiaries, and not just employees participating in the plan.
The health insurance issuer is responsible for paying the fee. However, the plan sponsor is responsible if the plan is self insured. The plan sponsor is the employer in the case of a single-employer plan, and the employee organization if the plan is established or maintained by such organization.
|Fee Schedule for Self-Insured Calendar-Year Plan|
|2012||$1 x Average Number of Covered Lives|
|2013||$2 x Average Number of Covered Lives|
|2014||$2* x Average Number of Covered Lives|
|2015||$2* x Average Number of Covered Lives|
|2016||$2* x Average Number of Covered Lives|
|2017||$2* x Average Number of Covered Lives|
|2018||$2* x Average Number of Covered Lives|
*This amount will be adjusted for projected increases in National Health Expenditures.
How will the fee be used?
The health reform bill establishes a Patient-Centered Outcomes Research Institute to “assist patients, clinicians, purchasers and policy-makers in making informed health decisions by advancing the quality and relevance of evidence concerning the manner in which diseases, disorders, and other health conditions can effectively and appropriately be prevented, diagnosed, treated, and managed.” The Institute’s funding will come from the Patient-Centered Outcomes Research Trust Fund, which will be funded by appropriations and fee proceeds.
For purposes of this provision a self-insured plan includes any group health plan that provides any portion of its coverage through means other than an insurance policy and that is established or maintained –
- By one or more employers for the benefit of current or former employees
- By one or more employee organizations for the benefit of members or former members.
- Jointly by one or more employers and one or more employee organizations for the benefit of current or former employees.
- By a voluntary employees’ beneficiary association (VEBA).
- By any organization described in IRC § 501(c)(6) (basically not-for-profit business leagues, chambers of commerce, real estate boards, boards of trade, or professional football leagues, if no part of net earnings inure to the benefit of any private shareholder or individual).
The term also includes any multiple employer welfare arrangement (MEWA) and certain other specified plans.
Effective date: The fee is imposed for each policy year or plan year (in the case of self-insured plans) ending after September 30, 2012. However, no fee is imposed for policy or plan years ending after September 30, 2019. The fee applies with respect to all group health plans, including grandfathered plans.
Key implication: Cost
The fee represents a direct cost to sponsors of self-insured plans. Health insurance issuers likely will incorporate the fee into premiums, potentially resulting in increased costs for the plan sponsor and/or participants.
Smart first steps for employers to consider
Cost: Discuss the fee with health insurance issuers and inquire about the expected impact on future premiums. Sponsors of self-insured plans might begin thinking about whether and to what extent the fee can be built into overall plan costs.
Plan design: Consider how changes to the plan’s eligibility provisions will affect the fee amount, especially in the case of self-insured plans.
Communications: Include information about the fee in any participant communications designed to explain upcoming premium increases or other changes to cost-sharing requirements or benefits.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.