Health care reform created a new nonprofit corporation, the Patient-Centered Outcomes Research Institute (PCORI), to support clinical effectiveness research. PCORI is funded by fees paid by certain health insurers and sponsors of self-insured health plans. Its purpose is to fund research that can help patients and those who care for them make better-informed decisions about the healthcare choices they face every day, guided by those who will use that information. PCORI fees fund research likely to change practice and improve patient outcomes, focusing on sharing those results with the public.
PCORI fees & important dates to remember.
The fees, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan. Payments are due no later than July 31 of the year following the last day of the policy or plan year. For example, a Form 720 that reported the fee on a health insurance policy for the year ending on Dec. 31, 2018, is required to be filed by July 31, 2019. Similarly, a return that reported the fee for a health plan for a plan year which ended on March 31, 2018, will be required to be filed by July 31, 2019.
PCORI fees will expire in 2019 for plan years ending on or after Oct. 1, 2019. Plan years ending in 2019 on September 30 or before will need to file PCORI fees for that plan year by July 31, 2020. For example, a non-calendar year plan that ends on Sept. 30 will need to pay the PCORI fee for their plan year ending in 2018 on July 31, 2019 and will pay for their plan year ending in 2019 on July 31, 2020.
Fees are payable in connection with major medical self-insured health plans, paid by the plan sponsors of such plans. For a single employer plan, the employer is responsible for the fee. Self-insured plans subject to PCORI fees also include HRAs and health FSAs.
Last year, plans ending on or after Oct. 1, 2017 and before Oct. 1, 2018 had fees of $2.39 per covered life. The IRS announced that the adjusted applicable amount is $2.45 per covered life for policy or plan years ending on or after Oct.1, 2018 and before Oct.1, 2019. The fee imposed on a plan sponsor of a self-insured health plan is based on the average number of lives covered under the plan. This means not just employees covered under the policy or plan, but also dependents and former employees still receiving coverage under the policy or plan.
The regulations give self-insured plans a choice to use any of three alternative methods:
- First, a sponsor may determine the average number of lives covered under the plan for the plan year by calculating the sum of the lives covered for each day of the plan year and dividing that sum by the number of days in the plan year (called the “actual count method”).
- Second, a plan sponsor may determine the average number of lives covered under the plan for the plan year by adding the totals of lives covered on a date during the first, second, or third month in each quarter, or an equal number of dates for each quarter, and dividing the total by the number of dates on which a count was made (called the “snapshot method”).
- Third, a sponsor may determine the average number of lives covered under the plan for the plan year based on a formula that includes the number of participants actually reported on the Form 5500 for the plan year (called the “Form 5500 method”).
A special counting rule applies if an employer that sponsors a self-insured medical plan also sponsors a health FSA or HRA (the arrangements can be treated as a single self-insured health plan if the arrangements have the same plan year for purposes of calculating the fee).
To learn more about calculating and paying PCORI fees, click here to visit the IRS website.
For FAQs, click here.