PCORI Fees Due By July 31, 2015

Established by the Affordable Care Act to be used as funding for the Patient Centered Outcomes Research Institute (PCORI), the seven-year fee is intended to be used to evaluate the clinical effectiveness of different treatment options and is sometimes called the Comparative Effectiveness Research Fee.

The fee applies to both fully insured and self-funded group health plans, regardless of grandfathered status.  There is no exemption for plans maintained by government, not-for-profit or church employers.

In addition to major medical plans, HRAs and FSAs that do not qualify as excepted benefits are also subject to the fee.  An HRA/FSA integrated with other medical coverage may only be treated as a single plan if both have the same plan year and plan sponsor.  An insured major medical plan and self-funded HRA (e.g., deductible reimbursement plan) would be considered separate plans, which would each be responsible for payment of the fee.  No payment will be due for the following types of plans:

  • Stand-alone dental and vision coverage
  • Life insurance
  • Disability and accident insurance
  • Health FSAs with only employee contributions (or employer contributions up to $500 annually)
  • Health savings accounts (HSAs)
  • Hospital indemnity or specified illness coverage
  • Employee assistance and wellness programs that do not provide significant medical care or treatment
  • Stop-loss coverage

Insurance companies are responsible for payment of the fee for insured plans. The plan sponsor (generally the employer) is responsible for payment of the fee for a self-funded plan, including a self-funded HRA or deductible reimbursement plan offered in connection with an insured medical plan.  Those plan sponsors should report and pay the fee using the Quarterly Federal Excise Tax Return from the IRS (Form 720, Part II).  Detailed instructions on completion of Form 720 are available here.

The amount of the fee changes annually and is tied to plan year.  For this year, the fee will be $2 per covered life for plan years beginning February 1-October 1 and $2.08 for November, December and January 1 plan years.  That fee amount should be multiplied by the average number of individuals covered under the Plan during the applicable plan year (e.g., employee/spouse coverage would be considered 2 covered lives), although HRA/FSA plans can assume one covered life for each enrolled employee (or subscriber).  Retirees and COBRA participants should also be included in the covered lives calculation.

The average number of covered lives on which the fee is based may be determined using one of the following methods:

  • Actual count method–enrollment numbers on each day of the plan year are totaled and divided by total number of days in that plan year;
  • Snapshot method—Enrollment counts are taken from one consistent date each quarter (within 3 days) and divided by the number of dates on which a count was made; or
  • Form 5500 method (for plans that have actually filed the Form 5500 by July 31, 2015)—sum of reported participants covered at beginning and end of plan year; or if plan has self-only coverage, that sum divided by 2.Any erroneous payments should be reported using Form 720-X. The IRS has stated that plan sponsors may not reduce the amount reported and paid based on an overpayment from a prior year.
  • Plan sponsors must choose one method to use for each entire plan year, however they are permitted to change methods from year to year.
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About Dawn Kramer

Dawn is an attorney and Certified Employee Benefit Specialist (CEBS) in J.W. Terrill’s Consulting Services department. She advises clients on legal and regulatory issues affecting their employee benefit plans.

View all posts by Dawn Kramer

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