Starting July 31, 2013, the IRS will start collecting, and employers will start paying, a new excise tax authorized by the health reform law. This annual fee will be imposed on most insured and self-insured group health plans for the next seven years.
The feds have amended the April 2013 IRS Form 720 (Quarterly Federal Excise Tax Return) to include two new lines for collection of the Patient-Centered Outcomes Research Fee.
Employers will report the average number of lives they covered, and apply the rate per covered life. The tax is $1 times the average number of covered lives, as is reflected in the form. The rate grows to $2 for policy years that end after Oct. 1, 2013. It will be indexed to health inflation until it sunsets for plan years ending on or after Oct. 1, 2019.
Employers are asked to separately list the number of lives covered: (1) under insured health insurance policies; and (2) by self-insured health plans.
Mandated in the health reform statute, the PCORI fee will fund research projects into outcomes-driven, patient centered, evidence-based and other approaches to health system improvement.
Employers may use a few methods of counting covered lives that will be accepted: (1) “actual count” (number of lives daily, divided by number of days); (2) “snapshot” (less frequent counts, but always on the same day of the month); and (3) “Form 5500” (relying on the figures reported on those forms, averaging start-of year and end-of-year worker numbers).
Other Reform Taxes
A tax on indoor tanning services is another health reform assessment that elbowed its way onto the IRS Form 720. That was added in July 2010.
The bigger addition to the excise tax form from health reform will arrive in the 2014 season: the excise tax of $2,000 per year per full-time employee for employers that do not offer health coverage.
For more information on the new fees under health reform, see Chapter 700 of The Health Reform Law: What Employers Need to Know.