The 2019 Patient-Centered Outcomes Research Institute (PCORI) fee due date is quickly approaching. This year also marks the end of PCORI fees for most self-insured health plans. Due on July 31, 2019, the PCORI fee applies to employer-sponsored health plans ending between September 30, 2018 and before October 1, 2019. Learn more about PCORI fees, deadlines, and applicability below.
What is PCORI?
Under the Affordable Care Act, insurance carriers that issue certain types of healthcare plans and employers that sponsor some self-insured plans must pay an annual fee to support the Patient-Centered Outcomes Research Institute. PCORI is a nonprofit institution that funds studies to help patients and caregivers make better-informed healthcare choices.
PCORI fees apply to plan years ending on or after October 1, 2012, and before October 1, 2019. For plan years that end on October 1 or later, there will not be any PCORI fee. There is one exception, however. For noncalendar-year plans that end between Jan. 1, 2019 and Sept. 30, 3019, there will be one last PCORI payment due by July 31, 2020.
What Types of Healthcare Plans are Subject the Fee?
Per IRS guidelines, most plans that provide accident and health coverage or major medical insurance coverage are required to pay the fee. Other types of plans include retiree-only medical coverage, state and local government healthcare plans, and COBRA. Health Reimbursement Arrangement (HRA) and Flexible Spending Account (FSA) plans are also subject to the fee, unless the arrangement qualifies as an excepted benefit.
There are some exemptions, though. Plans not subject to the fee include Medicare, stand-alone dental and vision plans, coverage for employees working overseas, and disability, among others.
PCORI Due Date and Calculating the Fee
The PCORI fee must be paid no later than July 31. This year, the fee increases from $2.39 to $2.45 per plan life covered. Every year, the “applicable dollar amount” that each plan must pay is adjusted to reflect inflation in national health expenditures.
The fee for a plan varies according to the average number of lives covered under the policy and the ending date for the plan year. To calculate the total, the average number of lives is multiplied by the applicable dollar amount for the plan year. Insurers that issue a plan to employers pay the fee, whereas self-insured plans are covered by the employer.
The IRS offers several different methods for determining the average number of lives, which differ between insurance carriers and self-insured plans.
Alternative Methods for Plan Issuers (Insurance Carriers)
- Actual count method. Allows carriers to count lives covered starting on May 14 rather than the first day of the policy year, then divide by the number of days remaining in the policy year. This applies to all plans that have policy years ending on or after October 1, 2012.
- Snapshot method. Carriers can use quarterly counts of lives covered by the policy. This applies to policy years that began before May 14, 2012 and end on or after October 1, 2013.
- Member months method and state form method. Insurance carriers can use a pro rata approach to calculate the average number of lives covered using the member months method or the state form method.
Alternative Methods for Self-Insured Plans
The IRS offers plan sponsors three different methods for determining the average number of lives covered for the plan year.
- Actual count method. Plan sponsors can add the number of lives covered for each day of the plan year and divide the total by the number of days in the plan year.
- Snapshot method. This method counts the total number of lives covered on one or more dates during each month of each quarter, and then divides the total by the number of times a count taken.
- Form 5500 method. This method is based on the number of participants reported on the Form 5500 or Form 5500-SF.
Alternative method details for both carriers and plan sponsors can be found here.
Paying and Reporting the PCORI Fee
To report and pay the fee, self-insured plan sponsors should fill out Form 720. Although Form 720 is a quarterly federal excise tax form, when used for PCORI purposes most companies only have to file it once a year. If you aren’t required to report any other liabilities on Form 720, you only have to file it once a year during the second quarter, by July 31.
The IRS does not require a deposit for the fee. You also don’t have to pay the fee using Electronic Federal Tax Payment System (EFTPS); however, if you choose to pay the fee using EFTPS, be sure to apply it to the second quarter by selecting the “Q2 Tax Period” on the Business Tax Payment page on the EFTPS web site.
If you have questions or need assistance, contact your benefits administrator. You can also refer to the IRS instructions on how to fill out Form 720 and calculate your fee.
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