IRS Issues Final Rule on the Comparative Effectiveness Fee

December 27, 2012

The comparative effectiveness fee is intended to fund health outcome and clinical effectiveness research conducted by the Patient Centered Outcomes Research Institute, also known as PCORI. The institute is a nonprofit organization created by the Affordable Care Act (ACA). On December 5, 2012, the IRS issued a final rule on the comparative effectiveness fee.  The final rule included one substantive change.  

The final rule specifies that, for issuers or plan sponsors using a snapshot method  for counting members, the issuer or plan sponsor must adhere to the following criteria:

• Date chosen must be staggered every three months, each quarter, as applicable. For example, if the issuer chooses February to count the number of members, it must select May for the second quarter, August for the third quarter and November for the fourth quarter.
• In the second, third and fourth quarters, the date must be within three days of the date used in the first quarter. For example, if the issuer chooses Feb. 4 for the first quarter, the date options for the second quarter are May 1 to May 7.  The 30th or 31st day of a month is treated as the last day of a month.
• All dates chosen must be within the same plan or policy year.
  

This change relaxes the guidance in the proposed rule, which would have required issuers that use a snapshot method to pick the same day every three months, each quarter.

Where can I find more information?

To learn more, you can click here to read the IRS final rule or the Blue’s June 2012 Reform Alert, Further clarifications on the Comparative Effectiveness Fee.

_{[1] Fully insured snapshot method: Add the totals of lives covered on one date in each quarter (or an equal number of dates for each quarter) and divide the total by the number of dates on which a count was made.  Self funded has two snapshot options. Snapshot count method: The number of lives covered on a date may be determined as equal to either the sum of the actual number of lives covered on the dates, or Snapshot factor method: The sum of (1) the number of participants with self-only coverage on that date, plus (2) the number of participants with coverage other than self-only coverage on the date multiplied by 2.35.} 

The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by U.S. Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.