Recently, the IRS issued proposed regulations on the comparative effectiveness research fees required by the Affordable Care Act (ACA). While the ACA may be struck down any day by the Supreme Court, if it stands, HRA Plans may be subject to the proposed research fee rules. Read on for a quick guide on how the research fees will currently be applied to health reimbursement arrangements (HRAs).
Background on the HRA Research Fee
The Affordable Care Act includes a "research fee" HRA plan sponsors must pay on an annual basis. The fee is technically referred to as the Comparative Effectiveness Research (CER) fee. According to the bill, this fee will be used to fund governmental research -- ACA created the "Patient-Centered Outcomes Research Institute" to evaluate the relative effectiveness of various medical treatments and procedures.
The ACA imposes this fee on insured plans and self-insured health plans. The IRS has determined an HRA falls under the "self-insured health plans" definition, since HRAs are technically Section 105 ERISA health plans funded by employers. At present, the fee is scheduled to become effective for plan years ending on or after October 1, 2012.
How the HRA Research Fee Works
According to the proposed rules, the types of HRA plans that must pay the fees are HRAs that are not integrated with another applicable self-funded medical plan with the same plan year.
The research fees go into effect for plan years ending on or after October 1, 2012 and before October 1, 2019. The fee will be adjusted each year, as follows:
- Plan years ending October 1, 2012 – September 30, 2013: $1 multiplied by the average number of lives
- Plan years ending October 1, 2013 – September 30, 2014: $2 multiplied by the average number of lives
- Plan years ending October 1, 2014 and beyond: to be determined based on increases in the projected per capita amount of National Health Expenditures
For HRAs that must comply, there is a special rule that you would only count one covered life for each employee. Thus, a family of four covered by an HRA would result in only a $1.00 fee ($1.00 x the employee-participant only).
HRA plans will only be required to report and pay fees annually via Form 720, due by July 31 each year.
A good HRA Administrator will provide the plan sponsors with reporting to assist with participant counts.
It is important to note these are "proposed" regulations only, which means the IRS will be taking public comments before they become final. Written or electronic comments must be received by July 16, 2012.