The Affordable Care Act created the Patient-Centered Outcomes Research Institute (PCORI), an organization that supports health plan clinical effectiveness research. ACA requires insurers and self-funded plans to pay a yearly fee to support the organization and its mission.
PCORI is funded by fees paid by insurers and self-funded health plans, based on number of enrolled individuals. The fee first applied to plan years ending on or after October 1, 2012 and continues to apply to plan years ending before October 1, 2019. The fee is due by July 31 of the calendar year following the close of the plan year. PCORI fees for a 2016 calendar year plan, as well as fees for a 7/1/2015-6/31/2016 plan year, must be paid by July 1, 2017.
Most health plans are subject to the fee. An exception is made for stand-alone dental or vision plans, EAPs, wellness programs, plans for employees outside of the U.S., HSAs, and almost all HRAs and FSAs. Click here for a chart explaining the types of plans that must pay the PCORI fee.
The insurance company is responsible for paying the fee for employers with insured plans. An employer with a self-funded plan will be responsible for completing the filing and paying the fee for it’s self-funded plan. The annual fee is $2.26 times the average number of covered lives for plan years ending on or after October 1, 2016 and before October 1, 2017.
The rules allow employers with self-funded plans to select among three methods for determining the number of covered lives.
- Actual Count Method. Calculate the sum of the lives covered for each day of the plan year and divide that sum by the number of days in the plan year.
- Snapshot Method. Add 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 divide the total by the number of dates on which a count was made.
- Form 5500 Method. Include the number of lives actually reported on Form 5500 for the plan year (may be used only if Form 5500 is filed before PCORI Fee filed).
Insurers may select among four methods for determining the number of covered lives.
- Actual Count Method. Calculate the sum of lives covered for each day of the policy year and divide the sum by the number of days in the policy year.
- Snapshot Method. Add the total number of covered lives on a date during the first, second or third month in each quarter of the policy year, or an equal number of dates for each quarter, and divide the total by the number of dates on which a count was made.
- Member Months Method. Use the member months reported on the National Association of Insurance Commissioners Supplemental Health Care Exhibit, divided by 12.
- State Form Method. For an insurer not required to file the NAIC Exhibit, use data in any form that is filed with the state of domicile of the state form reports the number of lives covered.
PCORI fees are reported on Form 720, Quarterly Federal Excise Tax Return, for the second quarter of the year. The fee can be paid electronically or mailed to the IRS with the filing. The fee is tax-deductible as a business expense. Employers should make sure to count covered lives correctly and only pay the fee on individuals enrolled in medical plan coverage.
BAS reporting tools may help employers in calculating the PCORI fees due. For more information, contact your account manager or solutions@BASusa.com.
