Section 2. BACKGROUND

.01 Section 6301 of the Affordable Care Act added new § 9511 to the Internal Revenue Code (Code) to establish the Patient-Centered Outcomes Research Trust Fund as a funding source for the Patient-Centered Outcomes Research Institute. The Trust Fund, in turn, will be funded in part through fees payable by issuers of health insurance policies and sponsors of self-insured health plans. Section 6301 of the Affordable Care Act also added new §§ 4375, 4376, and 4377 to the Code to impose those fees on what the statute refers to as “specified health insurance policies” and “applicable self-insured health plans” based on the average number of lives covered under the policy or plan. The fees are effective for policy and plan years ending after September 30, 2012.

Fees on Specified Health Insurance Policies Under § 4375

.02 Section 4375(a) imposes a fee on each specified health insurance policy for each policy year ending after September 30, 2012. Therefore, the first policy year to which the fee on a specified health insurance policy applies would be a policy year that ends on October 1, 2012. The fee does not apply to policy years ending after September 30, 2019. Accordingly, if the policy year were the calendar year, the fee would apply to calendar policy years 2012 through 2018.

.03 The fee under § 4375 is equal to two dollars (one dollar in the case of policy years ending before October 1, 2013) multiplied by the average number of lives covered under the policy. Under § 4375(b), the fee must be paid by the issuer of the policy.

.04 Section 4375(c) defines “specified health insurance policy” as any accident or health insurance policy (including a policy under a group health plan) issued with respect to individuals residing in the United States. The term also includes an arrangement under which fixed payments or pre

miums are received as consideration for a person’s agreement to provide or arrange for the provision of accident or health coverage to residents of the United States, regardless of how such coverage is provided or arranged to be provided. In such a case, the person agreeing to provide or arrange for the provision of coverage is treated as the issuer. “Specified health insurance policy” does not include any insurance if substantially all of its coverage is of excepted benefits described in § 9832(c).

.05 Section 4375(d) provides that, for any policy year ending in any fiscal year beginning after September 30, 2014, the dollar amount in effect under § 4375(a) is equal to the sum of (1) the dollar amount for policy years ending in the previous fiscal year, plus (2) the amount equal to the product of (A) the dollar amount for policy years ending in the previous fiscal year, and (B) the percentage increase in the projected per capita amount of National Health Expenditures, as most recently published by the Secretary before the beginning of the fiscal year. For purposes of § 4375, the term “fiscal year” means the Federal government’s fiscal year, which runs from October 1 to September 30. Because Treasury does not publish the National Health Expenditures, Treasury and the Service intend that the proposed regulations will refer to the National Health Expenditures published by the Department of Health and Human Services.

Fees on Applicable Self-Insured Health Plans Under § 4376

.06 Section 4376(a) imposes a fee on any applicable self-insured health plan for each plan year ending after September 30, 2012. Therefore, the first plan year to which the fee on an applicable self-insured health plan applies would be a plan year that ends on October 1, 2012. The fee does not apply to plan years ending after September 30, 2019. Accordingly, if the plan year were the calendar year, the fee would apply to calendar plan years 2012 through 2018. The fee is equal to two dollars (one dollar in the case of plan years ending before October 1, 2013) multiplied by the average number of lives covered under the plan.

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veterans, and (D) any program established by Federal law for providing medical care (other than through insurance policies) to members of Indian tribes (as defined in § 4(d) of the Indian Health Care Improvement Act, 25 U.S.C. 1603).

.14 Section 4377(c) provides that, for purposes of subtitle F of the Code, the fees imposed by §§ 4375 and 4376 are treated as if they were taxes.

Data Reported on the NAIC Supplemental Health Care Exhibit

.15 State insurance departments currently require issuers operating in their jurisdictions to provide a primary financial report referred to as an Annual Statement. The format of the Annual Statement and the rules to be followed in preparing it are established by the National Association of Insurance Commissioners (NAIC). After the Affordable Care Act was enacted, the NAIC developed a Supplemental Health Care Exhibit (Exhibit) for the purpose of collecting comprehensive major medical data by company, state, and market. Information collected on the Exhibit includes the number of individual policies (for individual and association business) or certificates issued to individuals covered under a group policy in force as of the end of the reporting period and the total number of lives insured, including dependents, under individual policies and group certificates as of the end of the reporting period. Many issuers of specified health insurance policies are required by one or more state insurance commissioners to file the Exhibit.