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It's Time for Insurers to Pony Up PCORI Fees

By John Reichard, CQ HealthBeat Editor

July 19, 2013 -- A provision of the health overhaul that its framers hope will help bend the cost curve in health spending that threatens to swamp government and corporate health care budgets will take effect on July 31. That’s when insurers are due to make payments to the Internal Revenue Service to help fund the institute that pays for research to pinpoint what works in medicine and what doesn’t.

And presumably the fees on insurers—which will total about $130 million this year and roughly double that next year and each subsequent year until Sept. 30, 2019—will give opponents of the law another chance to criticize the costs it creates for consumers. They are also likely to raise the specter of government directed rationing.

The money goes into the trust fund established for the Patient Centered Outcomes Research Institute (PCORI). Under the health law, there are two funding streams for that account, which is expected to receive $3.5 billion through Sept. 30, 2019, when the authorization for the trust fund expires. One source is the U.S. Treasury, the other is fees paid per enrollee by private health insurance plans, self-insured plans and Medicare.

Insurers must pay the fees by July 31 after the end of each plan year. So the payments for plan year 2012, the first year for which the fees are assessed, are due July 31, 2013.

According to the PCORI website, in fiscal 2013 the amount going into its trust fund will total $320 million, of which $150 million comes from the Treasury and the remainder from Medicare and insurers.

For fiscal years 2014–2019, the per-enrollee fee doubles to $2, with $150 million in each of those years coming from the Treasury. “The combined estimated total averages $650 million per year,” the PCORI site says. PCORI itself doesn’t collect the money.

If the research works out the way policymakers hope, the findings will identify areas of wasteful treatment that insurers will be able to avoid covering. Medicare coverage isn’t automatically changed as a result of the findings, but PCORI critics claim it will lead to government rationing, while supporters say it makes no sense to spend limited health care dollars on treatment approaches that don’t work.

Because of potential savings from the research and the relatively modest charges on insurers, it may not be a major cause of industry complaints.

But “all of the new taxes and fees will ultimately add to the cost of health coverage,” America’s Health Insurance Plans spokesman Robert Zirkelbach said in an email message. “We have been focused on the much larger health insurance tax that will increase premiums for families and small businesses at a time when all of the other [Affordable Care Act] reforms are going into effect.” Separate from the far smaller PCORI fee, the health law (PL 111-148, PL 111-152) assesses fees on insurers as a way to help fund coverage expansion under the health law including the subsidies that help people buy insurance adding to insurance industry revenues.

Zirkelbach said these other fees “will mean that next year an individual purchasing coverage on his or her own will pay $110 in higher premiums, small businesses will pay an additional $360 for each family they cover, seniors enrolled in Medicare Advantage will face $220 in reduced benefits and higher out-of-pocket costs, and state Medicaid managed care plans will incur an additional $80 in costs for each person enrolled.”

John Reichard can be reached at [email protected].

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