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IRS Regulations Describe New Health Plan Fee

Recent IRS regulations provide guidance to employers and insurers on the calculation and payment of a new fee on health plans.  The fee is part of health care reform and will be used to fund the Patient Centered Outcomes Research Institute.  The first fee payments will be due by July 31, 2013, and relate to plan years ending on or after October 1, 2012. 

Employers are responsible for calculating and paying this fee with respect to any self-insured health plans they sponsor.  Insured plans are subject to the fee also, although the insurance carrier is responsible for calculating and paying the fee.  The fee is $1 (increasing to $2 in the second year), multiplied by the average number of lives covered under the plan during the year. 

A key issue in calculating the fee is determining the average number of lives covered by a plan during a year.  (Covered lives include not only covered employees, but also spouses, dependent children, COBRA beneficiaries, retirees, and any other persons with coverage under the plan.)  The regulations give employers four options for calculating this number.  Two of the options involve counting the actual number of covered lives under the plan as of certain dates during the plan year.  A third option uses a formula based on "snapshots" of the number of employees in the plan at various points during the plan year, and the fourth option uses a formula based on the number of participants shown on the Form 5500 for the plan.

The fee applies to all self-insured plans, other than health FSAs that qualify as "excepted benefits".  Covered plans include health reimbursement arrangements (HRAs), even if they are used in coordination with an insurance policy.  Health savings accounts (HSAs) and certain EAP, wellness and disease-management plans are excluded.

Employers should take the time now to evaluate whether they have plans that are subject to this fee and, if so, begin collecting the information necessary to calculate and pay the fee.  You can read the regulations here.


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Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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Boyd Byers, the General Employment Law Guy
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Jason Lacey, the Employee Benefits Guy
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