IRS Releases Final Regulations On Fees For Health Insurers To Fund Patient Center


The Internal Revenue Service has issued final regulations implementing and providing guidance on certain fees imposed by the Patient Protection and Affordable Care Act (ACA). New Code Secs. 4375 through 4377 impose fees on two groups of insurers. The first group comprises issuers of accident and health insurance policies issued to U.S. residents, including prepaid health coverage arrangements. The final regulations were published in the December 6 Federal Register.

The second group includes plan sponsors of certain self-insured health plans, meaning employers and employee organizations sponsoring a 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: (1) by one or more employers or employee organizations to benefit their employees or members (or former employees or members); (2) jointly by one or more employers and one or more employee organizations; (3) by a voluntary employees’ beneficiary association; (4) by a Code Sec. 501(c)(6) organization; or (5) by a multiple employer welfare arrangement, a rural electric cooperative, or a rural telephone cooperative association.

The fees are intended to fund the Patient-Centered Outcomes Research Institute (PCORI), which was established by the ACA to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions. The PCORI fee is imposed on policy issuers for each policy year ending on or after Oct. 1, 2012, and before Oct. 1, 2019. The fee is $2 multiplied by the average number of lives covered under the policy or plan. Affected issuers and sponsors must pay the PCORI fee by July 31 of the year following the last day of the policy or plan year. The PCORI fee is reported and paid on Form 720, Quarterly Federal Excise Tax Return.

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