On April 12, 2012, the Internal Revenue Service (IRS) issued proposed regulations implementing fees on certain health insurance issuers and self-funded group health plan sponsors to help finance the Patient-Centered Outcomes Research Institute established under the Patient Protection and Affordable Care Act (PPACA). The fees will fund research on comparative clinical effectiveness to assist healthcare providers and consumers in making informed health decisions.

Insurers issuing fully-insured accident and health policies and the plan sponsors of self-insured group health plans, including retiree-only plans, are subject to the fee. The fee is not imposed on certain "excepted" benefits (e.g., limited-scope dental/vision benefits, employee assistance programs that do not provide significant medical care benefits, HRAs that are integrated with a self-insured health plan that provides major medical coverage if both plans are maintained by the same plan sponsor and most flexible spending accounts) or government programs (e.g., Medicare, Medicaid and SCHIP programs). The fee is calculated based on the applicable dollar limit ($1 for the first plan year ending on or after October 1, 2012, and before October 1, 2013; $2 for the second year and indexed thereafter based on increases in national health expenditures) multiplied by the average number of covered lives (including employees and their dependents) for each plan or policy year. The fee is set to expire on October 1, 2019. The proposed regulations provide various methods for calculating the average number of covered lives, such as an actual count method, a snapshot count method, a "Form 5500 method" based on the average number of participants at the beginning and end of the plan year, or a special rule for 2012 authorizing any reasonable method of determining the average number of covered individuals.

The plan or policy must file a return (IRS Form 720 - Quarterly Federal Excise Tax Return) with the assessed fee by July 31 of the calendar year following the last day of the applicable plan or policy year. Therefore, for plan years ending December 31, 2012, the return and related fee are due by July 31, 2013.