Fee on Insurance Policies to Support Patient-Centered Outcomes Research Institute

The Affordable Care Act establishes a private, nonprofit Patient-Centered Outcomes Research Institute (PCORI) that is responsible for conducting comparative clinical effectiveness research and providing information to help health care providers evaluate and compare the effectiveness and risks of various medical treatments and procedures.  The PCORI is funded by the Patient-Centered Outcomes Research Trust.  The trust fund will be partially funded by fees levied on issuers of specified health insurance policies and sponsors of self-insured health plans.

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Who is responsible for paying the fee?

Fully Insured Policies and Plans – For policies issued in the individual market or fully insured group health plans in the small or large group market, the insurance issuer is responsible for paying the PCORI fee on fully insured policies and plans.

Employers are responsible for the fee if they offer the following:

  1. Sponsor self-insured health plans.  An applicable self-insured health plan is a plan providing accident or health coverage with any portion provided other than through an insurance policy.
  2. Health flexible spending arrangements (health FSAs) or health reimbursement accounts or Medical Expense Reimbursement Plan (HRAs or MERPs) in conjunction with fully insured health insurance coverage are considered to be providing a separate, self-insured plan subject to the PCORI fee.  If the HRA or FSA are coupled with a self-insured health plan you only have to pay the fee for the health plan.  Note: Archer medical savings accounts (Archer MSAs) and health savings accounts (HSA’s) are not considered health insurance policies or self-insured health plans.

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Amount of the PCORI Fee

The PCORI fee applies for each policy of plan year ending after September 30, 2012 and before October 1, 2019.  Therefore, for calendar-year policies/plans, it applies to policy/plan years 2012-2018.  For policy/plan years ending before October 1, 2013 the PCORI fee is $1 multiplied by the average number of covered lives.  For each applicable year ending after September 30, 2013, the PCORI fee is $2 multiplied by the average number of covered lives.  The fee may be increased for policy/plan years ending in any fiscal year beginning after September 30, 2014 based on the rate of inflation of certain medical costs.  The PCORI fee is reported on Form 720 (Quarterly Federal Excise Tax Return).  The first return is due July 31, 2013.

Covered Lives

According to guidance by the IRS, the simplest method to calculate the number of covered lives to report is as follows:

  • Determine the number of employees covered on the first day of your plan year.
  • Determine the number of employees covered on the last day of your plan year.
  • Add these together and divide by two.
  • Report the resulting average to the IRS.

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If you have a plan administrator, please contact them for assistance determining if you are required to pay the PCORI fee.

Comments (1)

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