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Patient-Centered Outcomes Research Trust Fund Fees (“PCORI” Fees) Final Regulations Issued

Recently, the Department of Treasury issued final regulations on the fees imposed to fund the Patient-Centered Outcomes Research Institute (“PCORI”), a private non-profit corporation that gathers research-based information to assist patients, practitioners and policy makers in making informed health care decisions.  (Our discussion of the proposed regulations is here.) The fees, to be paid by issuers of health insurance policies and sponsors of self-insured health plans, were instituted as part of the Patient Protection and Affordable Care Act (“PPACA” or “Health Care Reform”).  They apply to policy and plan years ending on or after October 1, 2012 and before October 1, 2019.

Although the fee applies to insured and self-insured plans, because the insurance issuer is responsible for paying the fee on insured plans, this post focuses on the fee as applied to self-insured employer-sponsored health plans.

How Much?

The PCORI fee is $2 times the average number of covered lives during the plan year that ends before October 1, 2014 ($1 per covered life for plan years ending before October 1, 2013).  After 2014, the fee will increase based on increases in the projected per capita amount of National Health Expenditures.

Which Self-Insured Plans Are Subject / Exempt?

The fee applies to lives covered under an “applicable self-insured health plan,” which is defined as any plan for providing accident or health coverage if any portion of the coverage is provided other than through an insurance policy, and the plan is established or maintained

News & Notes – December 21, 2012

News & Notes – December 21, 2012

December 21, 2012

Authored by: Chris Rylands

If you’re reading this, it must mean the Mayans were wrong, so since the world is continuing, why not check out our list of recent News & Notes items?

  • A recent study by the International Foundation of Employee Benefit Plans found that 84% of employers plan to keep offering coverage in 2014.
  • But even if its offered, an Employee Benefits Research Institute study found some employees might not take it if it Congress decides to tax insurance as part of the fiscal cliff negotiations (if you can call them that).
  • The Commonwealth Fund has put together an interactive map, and additional information, about various States’ decisions on implementing the PPACA exchanges.
  •  Since we have so often talked about Hurricane Sandy relief in this column, we would be remiss if we did not point out the additional chart and FAQs that the IRS has released.  These are included, among other items, in the most recent IRS Retirement News for Employers, as well.
  • We have noted that employers are considering private exchanges and some of the issues around that.  This Employee Benefits News guest post suggests that a private exchange might not make the best economic sense.  Do you agree?

More on Transitional Reinsurance Sticker Shock

By now, most plan sponsors have probably managed to pick themselves up off the floor after hearing about the $63/year/covered life transitional reinsurance fee that they will either pay (if self-funded) or have passed on to them (if they are insured).  We were on top of this months ago, and the most recent guidance from a couple of weeks ago doesn’t change the landscape too much, but there are a few items to note:

  • The fee is based on the anticipated need to collect $10 billion from health plans in 2014.  Under current law, that number will go down to $6 billion in 2015 and $4 billion in 2016.  Presumably, the fees will also go down in those years.  The “need” arises in order to subsidize health insurance coverage for those unable to afford it.
  • Retiree plans are subject to the fee.  However, CMS proposed that all plans (retiree or not) only need to pay for enrollees for which the plan is primary to Medicare as, of course, most are.  No reinsurance fee is due with respect to participants for whom Medicare is primary.
  • The good news is that the IRS has confirmed already that the fee is deductible, and it reports that the DOL has advised the IRS that the fee is a permissible plan expense.
  • States can set up “supplemental” reinsurance programs and charge separate fees, but these fees may not be levied against self-funded plans.

Private Health Exchanges: A Second Look Before Leaping

A while back, we posted some of our thoughts about compliance obligations that employers should consider before jumping into a private corporate health exchange.  Since that time, we have had a chance to hear and research a few more details about how some of these private corporate health exchanges would work and recognize that some of the concerns we expressed are mitigated by the structure.

As we understand it, the policies offered through these exchanges will not be individual policies, but will be group policies issued in the name of the sponsoring employer.  This alleviates concerns we had that employers might believe incorrectly that they were not sponsoring an ERISA plan and it limits the number of Schedule A filings an employer would have to make.  It also addresses our concern about multi-state insurance requirements, since the insurance contracts would presumably be governed by the state in which they are delivered (most likely, the state of the employer’s primary office).

The exchanges we’ve heard about would offer specific, non-negotiable plan designs set up by the exchange provider, but with a broader selection of insurers than most employers typically obtain themselves.  The broad array of insurers would allow employees to select the insurer with the most favorable network in his or her area, which is a feature an individual employer may not be able to secure on its own.

However, contrary to what many employers believe, the group policy for a particular employer would still be underwritten

News & Notes – December 7, 2012

News & Notes – December 7, 2012

December 7, 2012

Authored by: Chris Rylands

Below is our most recent list of News & Notes from the week that was.  Let us know what you think.  Should we continue this feature?

  • Continuing with our unplanned New York theme, the New York Times recently reported how some non-traditional medical practitioners were lobbying to be included as “essential health benefits” under health care reform.  Is acupuncture essential?
  • Going completely to the other coast, CBS Los Angeles reported that LA County officials were scrambling to retain “paying patients” ahead of 2014.
  • Finally, can you imagine buying health insurance at the grocery store?  That may happen in the future, says this Kaiser Health News report.  Seeing the premium quotes might make us think twice about some of our purchases (Twinkies are healthy, right?).

Have a link that you’d like to share?  Leave us a comment below or send it to us at LinkedIn or Twitter.

 

401(k) Tax Subsidies & The Path of Least Resistance

In this post on Forbes.com, Jeffrey Brown points out (we think, correctly) that the employer tax subsidy plays a key role in the offering of retirement plans. We agree.

However, we think there is at least one point that Mr. Brown doesn’t really address. As he notes, the recent study reported in the New York Times economics blog that supposedly demonstrates that retirement tax incentives do not increase savings for high-income earners misses a big piece of the picture. The policy implications for the 401(k) deduction go beyond high-income earners.

Often times, those individuals have other uses for their money that the prescriptive investment and distribution rules of a 401(k) plan make it difficult for them to use the money as they intend. Even if those rules are not an impediment, nondiscrimination rules and existing legal limits may prevent them from saving sufficiently inside a plan, which is probably part of why, for them, employer-sponsored retirement plans may not necessarily increase their savings rate.

But all of that aside, some suggestions for lowering the 401(k) contribution limit (like the Simpson-Bowles report we’ve talked about previously) are likely to have a disproportionate impact on moderate income workers, not just the high earners. Capping contributions at 20% of pay (or $20,000, if less) is likely to hit almost everyone, not just the high rollers.

Interestingly, the authors of that study noted that most people are passive savers and are likely to take the path of least resistance. 

Paper by (Forced) Choice?

Paper by (Forced) Choice?

December 3, 2012

Authored by: Chris Rylands

AARP recently released survey results where plan participants were asked whether they preferred paper or electronic retirement plan disclosures.  AARP is touting this as proof positive that plan participants prefer paper over electronic disclosures.

In a prior life, I (Chris) used to help analyze test results, including those from self-report surveys.  Anyone who has done that work knows that how you ask the question matters greatly.  One of the key findings the AARP cites as strong evidence that participants pine for papyrus is this:

If forced to choose only one method for receiving retirement plan documents, three quarters (75%) of all respondents ages 25+ prefer paper over online.

Sure, except that question assumes a false dichotomy.  Even though many plan sponsors and many in the retirement plan industry have a strong preference for electronic disclosure (which, by the way, helps participants retirement savings accumulation in the form of reduced fees), no rational person is suggesting that we make everyone get their plan communications online or via email.  There are too many older participants who are unfamiliar with technology or those of low income who have insufficient access to electronic delivery methods.  They deserve as much disclosure as the iPhone-toting technology native in her 20’s who has never picked up a newspaper.

The more telling statistic to us is this one:

Only one-fifth of respondents (including just 27% of the younger age group), believed that a default in favor of electronic delivery should be the

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