Plan sponsors of self-funded health plans and insurers of insured health plans must pay a fee to help fund the Patient-Centered Outcomes Research Trust Institute. The Patient-Centered Outcomes Research Trust Institute (PCORI) fee is based on the average number of lives covered by the plan. The IRS issued final regulations on December 6, 2012, providing guidance on which policies, plans and plan sponsors are subject to the fee; how the fee is to be calculated; and, rules for depositing, paying, and return filing including electronic filing of returns.
The PCORI fee will be imposed for each plan year ending on or after September 30, 2012, and before October 1, 2019.The PCORI fee is a specified dollar amount times the average number of lives covered under the plan for the plan year.
- For policy and plan years ending after Sept. 30, 2012, and before Oct. 1, 2013, the applicable dollar amount is $1.
- For policy and plan years ending after Sept. 30, 2013, and before Oct.1, 2014, the applicable dollar amount is $2.
- For policy and plan years ending after Sept. 30, 2014, and before Oct. 1, 2015, the applicable dollar amount is $2.08.
- For policy and plan years ending after Sept. 30, 2015, and before Oct. 1, 2016, the applicable dollar amount is $2.17.
- For policy and plan years ending after Sept. 30, 2016, and before Oct. 1, 2017, the applicable dollar amount is $2.26.
- For policy and plan years ending after Sept. 30, 2017, and before Oct. 1, 2019, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.
The PCORI fee does not apply to HIPAA Excepted Benefits, such as standalone dental and vision plans and most Health FSAs. The fee also does not apply to Health Savings Accounts, Health Reimbursement Arrangements (HRAs) integrated with other self-insured coverage offered by the same sponsor, and, Employee
Assistance Programs (EAPs), disease management programs and wellness programs that do not provide significant benefits in the nature of medical care or treatment. To learn more about which benefits qualify as HIPAA Excepted, click here.
The PCORI fee must be paid for each "applicable self-insured health plan", which includes any plan providing accident or health coverage, regardless of size. This includes ERISA plans, and plans sponsored by church employers, federal, state and local government employers and Indian tribal government employers. HRA plans not integrated with another applicable self-insured health plan that provides major medical coverage, and a Health FSA that does not satisfy the requirements to be treated as an excepted benefit are subject to the PCORI fee. Significantly, standalone plans that only cover retirees are subject to the PCORI fee, even though retiree-only plans are otherwise exempt from the ACA law requirements.
The PCORI fee is reported and paid to the IRS once per year on the Form 720. Plan sponsors of self-insured plans must file by July 31st for the plan year ending during the preceding calendar year. Full payment of the PCORI fee is required by the July 31st due date of the Form 720. For IRS instructions, click here. To obtain the Form 720, click here.
For plan years beginning before July 11, 2012 and ending on or after October 1, 2012, the final regulations indicate that a plan sponsor may use "any reasonable method" to determine the average number of covered lives. For all other plan years, the final regulations identify three methods for determining the average number of covered lives:
- The "actual count" method. Add the number of covered lives for each day of the plan year, then divide by the number of days in the plan year.
- The "snapshot" method. Using similar dates in each quarter (or more frequently), determine the number of covered lives, then divide by the number of dates on which a count was made. Sponsors may count covered lives on each snapshot date using either the actual count method (see above), or a factor method – the number of participants on each snapshot date with self-only coverage PLUS the number of participants on each snapshot date with coverage other than self-only coverage times 2.35.
- The "Form 5500" method. For a plan providing only self-only coverage, add the Form 5500-reported total participants at the beginning and end of the plan year (in effect, using a factor of 2.0). The final regulations provide that a plan sponsor may not use this counting method for a plan year unless the Form 5500 for that plan year was actually filed on or before the following July 31st. In other words, if a plan sponsor with a calendar year plan requests a Form 5500 filing extension for the 2013 plan year and does not actually file the Form 5500 before July 31, 2014, it may not use the Form 5500 method for the 2013 plan year.
The final regulations establish similar rules for health insurance carriers covering members under an insured policy. If an employer has fully-insured coverage, the carrier and not the plan sponsor is responsible for determining and paying the PCORI fees for members covered under the insurance policy.