The nation has been waiting with bated breath for the most consequential Supreme Court decision in over a decade.

This morning the Supreme Court issued its anxiously awaited ruling on the 2010 federal healthcare law–the Patient Protection & Affordable Care Act (PPACA). Specifically, the court announced three final opinions of the term before the summer recess.

It appears that the Supreme Court has upheld the healthcare reform law’s “individual mandate” in an opinion authored by Chief Justice John Roberts and joined in by Justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor.

The high court concluded, as did the majority of lower courts, that Congress was acting within its powers under the Constitution when it required most Americans to carry health insurance or pay a penalty.  That provision was at the center of the two-year legal battle.

The ruling is a victory for Democrats and President Barack Obama, who had passed the biggest reworking of the nation’s healthcare system since the creation of Medicare in the 1960s.  It also averts disruption for employers who have spent more than two years preparing for changes in the law.

Despite the ruling, the law’s future remains uncertain.  Healthcare reform will remain hotly contested, and is bound to play a prominent role in political campaigns between now and Election Day.  Republican presidential nominee Mitt Romney and GOP leaders have pledged to repeal the law if they take control of Congress and the White House in November.

TASC Governmental Affairs will fully digest the ruling and examine the opinions before commenting further. Meanwhile, rest assured that TASC will continue to execute on the implementation of programs/legislation per PPACA mandates, and that we will obtain additional governmental guidance if necessary.

IRS Proposed Rules to Cover PPACA Research Fees

The Patient Centered Outcomes Research Institute (PCORI), a nonprofit corporation newly required by the Patient Protection and Affordable Care Act (PPACA), is being established to advance comparative clinical effectiveness research. Intended to assist patients, clinicians, purchasers, and others in making informed health decisions, PCORI will be funded in part by fees paid by issuers of certain health insurance policies and sponsors of self-insured health plans. Recently, the Internal Revenue Service (IRS) Dept. of Treasury issued proposed rules addressing the following…

Calculation of the Fee
The fee will be imposed for seven years (i.e. policy/plan years ending on or after October 1, 2012 and before October 1, 2019). The amount of the fee is equal to:

               Average Number of Lives Covered[1]   x   Applicable Dollar Amount

The applicable dollar amount is $1 for years ending on or after October 1, 2012 and before October 1, 2013 (Jan. 1, 2013–Dec. 31, 2013 for calendar year plans), but increases to $2 for years ending on or after October 1, 2013 and before October 1, 2014 (Jan. 1, 2014–Dec. 31, 2014 for calendar year plans). In the case of policies/plans beginning on or after October 1, 2014, the applicable dollar amount is to be adjusted to reflect projected increases in national health expenditures.   

Policies and Plans Subject to the Fee
The regulations define a health insurance policy—that is subject to the fee—as any health insurance policy (including under a group health plan) issued with respect to U.S.residents. The fees paid by self-insured health plan sponsors apply to plans established or maintained by an employer or employee organization that provides health coverage, as long as any portion of that coverage is not provided through an insurance policy.  NOTE: Health insurance policies/self-insured health plans that are not subject to the fee include any policy or plan in which essentially all coverage consists of excepted benefits (i.e. limited-scope dental or vision plans).

Benefit Accounts
The proposed rules do not exclude all such plans from the definition(s). However, if two or more arrangements have the same plan year and are established or maintained by the same plan sponsor, the arrangements may be treated as a single self-insured health plan. For example, if a plan sponsor maintains a HRA in addition to major medical coverage, the HRA and medical plan may be treated as one.

The regulations provide that a health FSA is excluded from the definition of an “applicable self-insured health plan” and therefore is not subject to the fee. They further clarify that Archer medical savings accounts and health savings accounts (HSAs) are not subject to the fees, but—unlike other PPACA provisions—that the fees may be imposed on retiree-only medical plans, even those with fewer than two active participants.

Payment of the Fee
Although excise taxes are generally reported and paid quarterly, the proposed rules state that issuers and plan sponsors may report and pay the PCORI fees once per year, on July 31.

The regulations provide detailed instructions regarding how to identify the plan sponsor of a self-insured health plan. In the case of a plan established or maintained by a single employer, the plan sponsor is the employer. If a plan is maintained by two or more employers, the plan sponsor is the employer identified as such in the plan’s documents (i.e. the Plan Document or Summary Plan Description). If no designation has been made, then each plan sponsor that maintains the plan is responsible for the portion of the fee that is attributable to said employer’s own employees.

PPACA requires that the issuer of the policy pay the fee for fully insured health coverage (including a fully insured group health plan), and that the plan sponsor pay the fee in the case of a self-funded health plan. Although a TPA (like TASC) may agree to assist in calculating and/or remitting the payment, the responsibility ultimately rests with the issuer or plan sponsor.

While the PCORI fee is unlikely to drive plan design, it is one more factor that deserves a closer look. It may be most significant with respect to HRAs, since failing to adequately integrate one of these account-based plans with major medical coverage can result in effectively doubling the amount of the fee.

Further analysis will be provided during our next Capital Connection webinar on Tuesday, May 22.

[1] The average number of covered lives includes all participants and beneficiaries [i.e. covered employees (regardless of whether full- or part-time), covered retirees, covered spouses and covered dependents]. For health FSA and HRA coverage, each participant may be treated as a single life, regardless of how many other individuals (e.g., spouse, dependents, and other beneficiaries) are actually covered.