Most employers that sponsor self-funded group health plans and insurers of fully-insured group health plans will need to file and pay by July 31 their first federal comparative effectiveness research imposed under the ACA.
What is the “PCORI fee”?
The Patient Centered Outcomes Research Institute fee is the first of the Affordable Care Act’s 5 taxes and fees to be collected. It funds health outcomes and clinical effectiveness research through a nonprofit organization created by the ACA.
What plans are subject to the fee?
- Medical plans
- Prescription drug plans
- Self-insured dental or vision plans, if provided without a separate election or premium charge
- Health reimbursement arrangements HRA
- Retiree-only health plans
What plans are exempt from the fee?
- Separately insured dental or vision plans
- Self-insured dental or vision plans if subject to separate coverage elections and employee contributions
- Expatriate coverage provided primarily to employees who work and reside outside of the US
- Health savings accounts (HSAs)
- Most Flexible spending accounts (FSA) -Unless employer makes additional, substantial “non-elective” or “matching” contributions to the employee’s FSA
- Employee assistance programs (EAPs) wellness programs, etc.
Who pays the fee?
- Fully-insured business: Health Insurance Issuer
- Group fully-insured business with Health Reimbursement Arrangement (HRA).
- Group policy: Fee applies to health insurance issuer
- HRA: Fee applies to plan sponsor
- Self-funded medical plan: Plan Sponsor (In most cases, this is the employer)
- Integrated HRA plan with same plan year, only one fee is assessed for self-funded groups
- The IRS Office of Chief Counsel recently confirmed that PCORI fees paid by an employer or insurer are tax-deductible, as ordinary and necessary business expenses, under section 162 of the Internal Revenue Code.
What is the ‘applicable dollar amount’?
Depends on when the plan or policy year ends.
- If the plan or policy year ends after October 1, 2012 and before October 1, 2013, $1 PMPY (Per member per year)
- If the plan or policy year ends after October 1, 2013 and before October 1, 2014, $2 PMPY
- If the plan or policy year ends after October 1, 2014 and before October 1, 2019, $2 indexed annually PMP
When is it due?
Any plan or policy ending between October 1, 2012 and December 1, 2012 will pay their first payment by July 31, 2013.
A policy year ending from January 1, 2013 to September 30, 2013 will pay the fee by July 31, 2014.
- The IRS recently updated the Form 720 (and related instructions) — which some employers already file, on a quarterly basis, to report certain federal excise taxes — to reflect the PCORI fee.
- Third party service providers, such as third party administrators, will not be allowed to file the Form 720 on behalf of a responsible entity.
- Employers sponsoring calendar year, self-funded group health plans (and insurers of calendar-year, fully-insured plans) must be prepared to complete and file the Form 720, and pay their first round of PCORI fees, by July 31.
How is it calculated?
Not collected “per belly button” but rather by employee only. There are specific calculation methods for fully-insured and self-funded:
Example methods for calculating lives can be found here http://www.bcbsm.com/content/microsites/health-care-reform/en/reform-alerts/further-clarifications-on-the-comparative-effectiveness-fee.html
For questions, please contact your dedicated Account Manager and consult your tax adviser.
*This blog is not intended to present legal or tax advice and should not be taken as such.