Insurers of "specified health insurance policies," under IRC Section 4375.

Plan sponsors of "applicable self-insured health plans," under IRC Section 4376 (for fully insured plans, it is the insurer, not the plan sponsor, that pays the fees).

Insurance Policies Subject to PCOR Fees. Although the proposed regulations' definition of applicable self-insured health plan contained an exclusion for employee assistance programs (EAPs), disease management programs or wellness programs that do not provide significant benefits in the nature of medical care or treatment, the definition of specified health insurance policy under the proposed rules did not include a similar exclusion. Commenters noted an inconsistency in states where certain EAPs are treated as insurance, and would therefore be subject to PCOR fees, notwithstanding that in any other state the same EAP would be excluded from the definition of applicable self-insured plan and not be subject to the PCOR fee. The final regulations clarify that the definition of specified health insurance policy does not include an insurance policy that provides for an EAP, disease management program or wellness program if the program does not provide significant benefits in the nature of medical care or treatment.

Retiree Coverage. IRS rejected commenters' requests to exempt retiree coverage from PCOR fees. As a result, the final regulations apply the PCOR fees to specified health insurance policies and applicable self-insured health plans that provide accident and health coverage to retirees, including retiree-only policies and plans.

COBRA Coverage. In response to comments seeking clarification of whether the PCOR fees apply to COBRA or similar state or federal continuation coverage, the final regulations expressly state that COBRA (and similar) continuation coverage must be taken into account in determining PCOR fees, unless the arrangement is specifically excluded.

Lives Taken Into Account When Calculating the Fee. The IRS rejected commenters' requests that the POCR fees not apply multiple times where coverage is provided to the same individual through more than one policy or self-insured arrangement (for example, if one individual is covered by a fully-insured major medical policy and a self-insured prescription arrangement). In general, the final regulations do not allow insurers or plan sponsors to disregard a covered life merely because the individual is also covered under another specified health insurance policy or applicable self-insured health plan. However, the final regulations permit applicable self-insured health plans that provide coverage through both fully-insured and self-insured options to determine the fee by disregarding lives covered solely under the fully-insured options.

Health Reimbursement Arrangements (HRAs) and Health Flexible Spending Arrangements (Health FSAs). An HRA is not subject to a separate fee (under the applicable self-insured health plan rules) if the plan sponsor also maintains a separate applicable self-insured health plan having a calendar year. In this case, the plan sponsor can:

However, because the fees for specified health insurance policies are separate from those for applicable self-insured health plans, a plan sponsor cannot treat the HRA and a fully-insured plan as a single plan or arrangement for purposes of the PCOR fees. The final regulations include additional examples clarifying how the PCOR fees apply to HRAs. For similar reasons, the IRS rejected a request that PCOR fees not apply to an employee's health FSA that is not an excepted benefit if the employee is covered by a major medical plan.

Self-insured Expatriate Plans. Under both the proposed and final regulations, a specified health insurance policy does not include any group policy designed and issued to cover primarily employees who are working and living outside the US (that is, expatriate plans). The final regulations clarify that an applicable self-insured health plan likewise does not include a self-insured plan that is an expatriate plan.

Rules for Determining the Applicable Fee. Plan sponsors and insurers may use a snapshot method to calculate the average number of lives covered under the plan or policy (see Legal Update, IRS Proposed Regulations Address Fees for Health Insurers and Self-insured Health Plans to Fund Patient-Centered Outcomes Research: Calculating the Average Number of Lives). The final regulations require plan sponsors and insurers that use the snapshot method to determine the counts used based on a date during the first, second or third month of each quarter, or more dates in each quarter if an equal number of dates is used in each quarter. The final regulations also provide that:

Correction and Amendments of Form 720. The final regulations specify that penalties for late filing of the applicable form or late payment of the applicable fee may be waived or abated if: