The Patient Protection and Affordable Care Act, or PPACA, requires sponsors and issuers of health plans and/or the plans to pay fees and provide notices to employees that in some cases require prompt actions to be taken, including calculations necessary to determine the amount of the fees to be paid. Sponsors of health plans should be aware of the following requirements and applicable deadlines.
July 31, 2013 (PCORI Fee). Each sponsor of a self-insured health plan must report the number of “covered lives” under its plan and pay a fee for the first plan year to which the fee relates in the amount of $1 per covered life to assist in the funding of the Patient-Centered Outcomes Research Institute. The PCORI fee is paid in connection with a filing on IRS Form 720 and will increase for future plan years for which the fee is due ($2 per covered life for the second plan year and indexed for subsequent plan years). PCORI fees are payable for plan years ending on or after Oct. 1, 2012 and before Oct. 1, 2019.
The IRS recently updated Form 720 to report the PCORI fee. Form 720 and instructions are available here. Plan sponsors should note that the PCORI fee information is to be included in item 133 of Part II of Form 720. The issuer of a fully-insured health plan is responsible for filing Form 720 and paying the applicable PCORI fee for such a plan. Form 720 and payment of the PCORI fee are due no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies and as a result, the first fee is due by July 31, 2013 for a plan maintained on a calendar year basis. The instructions to Form 720 provide guidance regarding the alternative methods of determining the number of covered lives for purposes of calculating the PCORI fee (designated for self-insured plans as the actual count method, the snapshot method and the Form 5500 method). Sponsors of self-insured health plans should take action now to select the method that will be used to calculate the number of covered lives and make the calculation. The PCORI fee generally may not be paid from the assets of the health plan.
Oct. 31, 2013 (Notice of Insurance Exchanges). Each employer covered by the Fair Labor Standards Act (whether or not the employer offers health coverage to its employees) is required to prepare and distribute a notice to its employees regarding health insurance exchanges that will be established under the PPACA in 2014. This notice is intended to provide employees with information regarding their health insurance coverage options under the marketplace exchanges established under the PPACA. Employers must provide the notice to all current employees by Oct. 1, 2013 and for employees hired after Oct. 1, 2013, the notice must be provided within 14 days of the employee’s start date. The U.S. Department of Labor issued guidance regarding this employee notice requirement in Technical Release 2013-02 and has prepared model notices that are available on the DOL’s website to assist employers in satisfying this notice requirement, one for employers that offer health plans (PDF) and one for employers that do not offer health plans (PDF). Model notices also have been posted by the DOL in Spanish for use by employers with Spanish-speaking employees (Spanish version for employers that offer health plans (PDF); Spanish version for employers that do not offer health plans (PDF)). The DOL has clarified through its Frequently Asked Questions that the applicable notice must be provided to each employee (regardless of health plan enrollment status or part-time or full-time status) and that employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the employer’s plan but who are not employees. The notice may be provided by first-class mail or may be provided electronically if made pursuant to the DOL’s electronic disclosure rules.
Updated COBRA Notice. When the DOL issued Technical Release 2013-02, it also released an updated model COBRA election notice that is intended to incorporate revisions relating to PPACA. The DOL does not state when health plans should begin using the updated notice, but it would appear the updated notice should be used on and after Jan. 1, 2014, because the revisions to the prior form of notice relate to matters arising after 2013, such as information that a qualified beneficiary may want to consider regarding alternatives to COBRA coverage available through the exchanges and/or premium credits. On the other hand, the notice of insurance exchanges described above is only required to be provided to employees and as a result, employers may want to begin using the updated COBRA notice for COBRA qualifying events that occur on or after Oct. 1, 2013 to provide qualified beneficiaries with PPACA-related information that could affect their COBRA elections.
Transitional Reinsurance Program Fee. Self-insured health plans and issuers of fully-insured health plans are required to pay fees under a three-year transitional reinsurance program established under PPACA, the Reinsurance Program Fee. The fee is intended to help stabilize premiums in the individual health insurance market and is scheduled to apply for calendar years 2014-2016. It is expected that the fee for 2014 will be $63 per covered life (determined in a manner similar to the methods used to calculate the PCORI fee) and that the amount will decrease in 2015 and 2016. For a self-insured health plan, the fee is assessed against the plan (and as a result, unlike the PCORI fee, may be paid from the assets of the plan) and may be paid through the plan’s third party administrator. Self-insured plans and issuers of fully-insured plans are required to report to the Department of Health and Human Services by Nov. 15 of the year in which the fee is due (the first report will be due by Nov. 15, 2014) the average number of covered lives under the plan (determined generally based on the first nine months of the year). HHS is required to notify each plan (or issuer) of the amount of the Reinsurance Program Fee to be paid and the fee must be paid to HHS within 30 days after the date of the notification from HHS of the amount required to be paid. This means that the initial Reinsurance Program Fee will be due on or around Jan. 14, 2015.