Affordable Care Act Fees and Rebates – A Crash Course
The Affordable Care Act (ACA) resulted in numerous reforms for health insurance carriers, employers, and individuals. This blog discusses some of the fees and rebates and their impact on ERISA health and welfare plans.
Patient-Centered Outcome Research Fees
The Patient-Centered Outcomes Research Institute (PCORI) was created as part of the reform and supports clinical effectiveness research findings. Per the IRS, “The PCORI fee applies to specified health insurance policies with policy years ending after Sept. 30, 2012, and before Oct.1, 2019, and applicable self-insured health plans with plan years ending after Sept. 30, 2012, and before Oct. 1, 2019. The fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year”, and is due July 31 based on the previous plan year.
This fee is paid by plan sponsors of applicable self-insured health plans. It cannot be paid from plan assets. If it is, this could be considered a breach of fiduciary duty and a nonexempt transaction.
Transitional Reinsurance Fees
This fee was established to stabilize premiums, assisting insurers by partially offsetting high-cost enrollees in inside and outside health care exchanges from 2014-2016. The Department of Health and Human Services has pre-established rates that are calculated per enrollee.
For fully-insured plans, this fee is paid by the insurer. For self-insured plans, this fee is paid by the plan sponsor and may be paid from plan assets. This fee can be passed along to participants.
The Health Insurance Industry Fee
This fee is used to fund federal and state-run exchanges and is assessed on health insurance providers, or those entities engaged in the business of providing insurance, for example, a Multiple Employer Welfare Arrangement (MEWA), based on premium revenues. This fee is due September 30 based on the prior plan year.
While this fee is paid by the health insurance providers, the fees can be passed on to their customers. Plans may see an overall impact of rising costs.
Medical Loss Ratio Rebates
Under the ACA, health insurers must report how policyholder premiums are spent by major categories, which in turn establishes medical loss ratio (MLR) standards. If certain health insurers do not spend at least a certain percentage of prior year premiums? on health care services, the plan may be eligible for a rebate.
If a rebate is received, the funds may constitute plan assets and the plan sponsor would need to comply with ERISA?s fiduciary provisions on how the rebate is handled and allocated.
If you have questions on the above fees and rebates and their impact on your plan, contact us.