IRS Proposed Rule Details How Health Care Reform Law Plan Fees Are Calculated

By Jerry Geisel

Apr. 13, 2012

Proposed Internal Revenue Service regulations would resolve numerous questions employers and others have raised about a fee that is to be imposed on health care plans issued by insurers and self-funded employers.

That fee—mandated by the health care reform law to fund research on medical outcomes—will be $1 per plan participant for the first plan year ending after Sept. 30, 2012, and $2 per participant in succeeding years.

For plan years starting after Sept. 30, 2014, the fee would be indexed to reflect the percentage increase in national medical expenditures as published by the Department of Health and Human Services.

The fee is to be paid annually by July 31 of the next plan year.

Many questions have been raised about the fees and to which type of health plans they would apply.

“This has been on employers’ 2012 health care reform radar screen,” said Andy Anderson, a partner with Morgan, Lewis & Bockius L.L.P. in Chicago.

For example, the proposed regulations that the IRS issued Thursday make clear that the fee would be imposed on retiree-only health care plans, even though such plans are largely exempt from the health care reform law.

In addition under the proposed rules, an employer with a health reimbursement arrangement linked to a self-funded high-deductible health care plan would be liable for the fee only for participants in its plan. It would not pay a second fee for participants in the HRA.

On the other hand, the fee would be imposed on HRAs if the arrangement were linked to an insured health care plan. In that situation, the employer would be liable for the fee covering participants in the HRA, while the insurer would be liable for the fee on the insured plan.

In short, “there will be two fees to be paid,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, New Jersey.

The proposed regulations also give examples of methodologies that health plan sponsors could use to determine the number of participants in their health care plans for calculating the amount of the fee they would owe.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email

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Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management.


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