Jun 10, 2016 – Compliance Observer Alert – The Next Round of PCORI Fees

Compl Obs Header Alert_2016

June 10, 2016

The Next Round of PCORI Fees

Applies to: Issuers and Self-insured Health Plans

The Affordable Care Act (ACA) requires health insurance issuers and sponsors of self-insured health plans to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). The fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return).  Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31.

The applicable rates for plans ending in 2015 are as follows:

  • $2.08 for plan years ending between January 1, 2015 and October 1, 2015
  • $2.17 for plan years ending between October 1, 2015 and December 31, 2015

The PCORI fees are based on the average number of covered lives under the plan or policy. This ordinarily includes employees and their enrolled spouses and dependents.  Individuals who are receiving continuation coverage (such as COBRA coverage) must also be included in the number of covered lives under the plan in calculating the fee.  Plan sponsors of self-insured health plans must use one of the following three methods to determine the average number of lives covered under a plan for the plan year:

  1. Actual Count Method: A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the play year and dividing that total by the total number of days in the plan year.
  2. Snapshot Method: A plan sponsor may determine the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second or third month of each quarter, and dividing that total by the number of dates on which a count was made.
  3. Form 5500 Method: An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.

SPECIAL COUNTING RULE FOR HRAS AND FSAS
Plan sponsors are permitted to assume one covered life for each employee with an HRA, even if the HRA can reimburse expenses of the employee’s family members. Similarly, plan sponsors are permitted to assume one covered life for each employee with an FSA.

The final regulations contain exceptions and also clarify how the PCORI fees apply to certain types of health coverage arrangements. For example, the PCORI fees do not apply if substantially all of the coverage under a plan or policy is for excepted benefits, as defined under HIPAA. In addition, the PCORI fees may apply to retiree-only plans and policies, even though retiree-only coverage is exempt from many of the ACA’s other requirements.

Please see the following IRS resources for more information on the ACA’s PCORI fees:

PCORI Fee Overview

PCORI Fee Question and Answers

Chart of Health Coverage and Arrangements subject to PCORI Fee

FORM 720 and Instructions

Please contact your AssuredPartners NL Benefits Team if you have questions or need assistance with these or other compliance matters

Information contained herein is for educational and/or informational purposes only.   The information provided may change over time as the laws and regulations change. This information is not, nor is it intended to be, legal advice and each employer or client should seek their own legal counsel for guidance regarding individual situations.

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