PCORI Fee - Benefit Commerce Group
PCORI Fee - Benefit Commerce Group
PCORI Fee - Benefit Commerce Group
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<strong>PCORI</strong> <strong>Fee</strong> (Patient-Centered Outcomes Research Institute)<br />
WHAT IS IT?<br />
Created by the Patient Protection and Affordable Care Act (PPACA), the <strong>PCORI</strong> fee is to promote research to evaluate and compare<br />
the health outcomes and clinical effectiveness, risks, and benefits of medical treatments, services, procedures, and drugs. <strong>PCORI</strong> is<br />
funded, in part, by fees assessed on health insurers and plan sponsors of self-insured group health plans.<br />
WHEN IS IT DUE? HOW MUCH IS THE FEE?<br />
For policy years ending on or after October 1, 2012, the first fee is due no later than July 31st of the calendar year immediately<br />
following the last day of the plan year; phasing out in 2019.<br />
For calendar year plans, the due date will be July 31 of the following year.<br />
Plan Year End <strong>Fee</strong> Due Date<br />
From October 1, 2012 through December 31, 2012 $1/covered life* 7/31/2013<br />
From January 1, 2013 through September 30, 2013 $1/covered life* 7/31/2014<br />
From October 1, 2013 through December 31, 2013 $2/covered life* 7/31/2014<br />
From January 1, 2014 through September 30, 2014 $2/covered life* 7/31/2015<br />
On or after October 1, 2014 going forward TBD** 7/31 of<br />
following calendar year<br />
*actual or average number of covered employees and dependents<br />
**fee is expected to increase until phase-out in 2019<br />
WHO PAYS?<br />
--Health insurers pay the fee on fully-insured plans.<br />
--Employers (plan sponsors) pay the fee on self-funded plans, including Health Reimbursement Accounts (HRAs).<br />
Retiree coverage and retiree-only plans are also subject to the fee.<br />
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Special rules for Health Reimbursement Accounts (HRAs) and Health Flexible Spending Accounts (FSAs).<br />
•If you have a fully-insured health plan and an HRA, the HRA is considered a self-funded plan. The health plan insurer pays the fee<br />
on the fully-insured group health plan and you, the plan sponsor, pay the fee on the HRA, even if you use a third-party HRA<br />
administrator.<br />
•If you sponsor both a self-funded group health plan and a separate HRA, you pay the fee only on the group health plan.<br />
•If you sponsor only an HRA with no group health plan, you pay the fee on the HRA.<br />
•Most health FSAs will not be subject to the <strong>PCORI</strong> fee because they satisfy the requirements to be an excepted benefit, specifically<br />
the maximum benefit requirement and group health plan coverage. If you believe your FSA may require a fee, please contact your<br />
FSA vendor for details.<br />
The IRS specifically states that retiree coverage and retiree-only plans are subject to the <strong>PCORI</strong> fee. The final regulations also clarify<br />
that accident and health coverage provided to individuals who have continuation coverage under COBRA or similar state<br />
continuation laws may be subject to the fee.<br />
HOW IS NUMBER OF COVERED LIVES DETERMINED?<br />
Rules for counting covered lives vary slightly for fully insured plans (fee paid by insurance company) and self-funded plans.<br />
Fully insured Plans--<br />
Four methods to count covered lives:<br />
Actual Count<br />
Snapshot Method<br />
NAIC Member Months Method<br />
State Form Method<br />
Self-funded Plans--<br />
Like fully insured plans, plan sponsors must use the same method consistently for the duration of any year and the same method for<br />
all policies subject to the fee.<br />
Actual Count – Count total covered lives each day of plan year and divide by the number of days in the plan year.<br />
Snapshot Method – Use data of covered lives on a single day in each quarter (or more than one day) and divide the total by<br />
the number of dates on which a count was made. (The date or dates must be consistent for each quarter.)<br />
o Snapshot Count: Count the total number of covered employee lives and covered dependent lives.<br />
o Snapshot Factor: Use the sum of: (1) the number of participants with self-only coverage, and (2) the number of<br />
participants with other than self-only coverage multiplied by 2.35.<br />
Form 5500 Method – For self-only coverage, determine the average number of participants by combining the total number<br />
of participants at the beginning of the plan year with the total number of participants at the end of the plan year as<br />
reported on the Form 5500 and divide by 2. In the case of plans with self-only and other coverage, the average number of<br />
total lives is the sum of total participants covered at the beginning and the end of the plan year, as reported on the Form<br />
5500. Sponsors that want to use the 5500 method for calculating covered lives need to ensure that the Form 5500 for<br />
those plans will be filed by their July 31 due date for <strong>PCORI</strong>, and that no extensions will be necessary.<br />
NOTE: If a self-funded plan sponsor has more than one self-funded plan (e.g., one for medical, another for pharmacy) it may treat<br />
them as a single self-funded plan for purposes of this fee to avoid double counting of the members. This special counting rule only<br />
applies to self-funded plans.<br />
WHAT FORM IS USED?/HOW IS THE FEE PAID?<br />
IRS Form 720 (Quarterly Federal Excise Tax Return Form) will be used for paying and reporting the <strong>PCORI</strong> fee. Third parties cannot<br />
report or remit the fees on behalf of plan sponsors.