In an effort to promote evidence-based research and improve healthcare outcomes, the Patient-Centered Outcomes Research Institute (PCORI) was established under the Affordable Care Act (ACA) in 2010. To fund its activities, PCORI collects a fee known as the PCORI fee from certain health insurance issuers and self-insured plan sponsors. The PCORI fee must be paid by July 31, 2023.
What is the PCORI Fee?
The PCORI fee is a per-employee, per-year fee levied on health insurance issuers and plan sponsors of self-insured group health plans. The fee is intended to support the research conducted by PCORI, which focuses on comparing the effectiveness of various medical treatments, procedures, and strategies. The aim is to provide patients, caregivers, and healthcare providers with evidence-based information to make informed decisions about healthcare options.
Purpose and Benefits:
The primary purpose of the PCORI fee is to generate funds for PCORI to conduct research that compares the effectiveness of different healthcare interventions. By evaluating the outcomes, benefits, risks, and costs associated with various treatment options, PCORI aims to provide valuable insights that can inform clinical decisions and improve patient outcomes. The research funded by PCORI helps to bridge the gap between research and clinical practice, ensuring that healthcare interventions are grounded in real-world effectiveness.
Who Pays the PCORI Fee?
The responsibility for paying the PCORI fee varies depending on the type of health insurance plan. In the case of fully insured plans, the fee is typically paid by the insurance company or health insurance issuer. For self-insured plans, the fee is paid by the plan sponsor, which is usually the employer.
Calculation and Reporting:
The PCORI fee is calculated based on the average number of covered lives under the health insurance plan for the policy year. The fee amount changes annually and is indexed to inflation. For plans that end on or after October 1, 2022, and before October 1, 2023, the PCORI rate per covered individual is $3.00.
Plan sponsors and insurance issuers must use one of three available calculation methods: the Actual Count Method, the Snapshot Method, or the Form 5500 Method. The chosen method must be consistently applied for the entire policy year.
- Actual Count Method: Under the Actual Count Method, the plan sponsor or issuer must count the total number of covered lives for each day of the policy year and then calculate the average. Covered lives include all individuals who are covered by the plan, including employees, dependents, and retirees. This method requires tracking the actual number of covered lives throughout the entire policy year.
Formula: Total number of covered lives ÷ Number of days in the policy year = Average number of covered lives
Once you have the average number of covered lives, you multiply it by the applicable PCORI fee rate to determine the total PCORI fee owed.
- Snapshot Method: The Snapshot Method offers a simplified way to calculate the PCORI fee by using a snapshot of the covered lives on a single date during each quarter of the policy year. The date chosen should be consistent each year. The covered lives are then counted on each snapshot date, and the average is calculated based on the sum of the covered lives from each quarter.
Formula: Sum of covered lives on snapshot dates ÷ Number of snapshot dates = Average number of covered lives
Similar to the Actual Count Method, once you have the average number of covered lives, you multiply it by the applicable PCORI fee rate to determine the total PCORI fee.
- Form 5500 Method: The Form 5500 Method allows plan sponsors to use the number of participants reported on the Form 5500 filed for the plan year. This method is only applicable to self-insured plans and requires that the Form 5500 is timely filed with the Department of Labor.
Formula: Number of participants reported on Form 5500 = Average number of covered lives
Once you have the average number of covered lives, you multiply it by the applicable PCORI fee rate to determine the total PCORI fee.
Impacts on Stakeholders:
- Employers: Employers who sponsor self-insured group health plans are directly responsible for paying the PCORI fee. This additional financial obligation needs to be factored into their overall healthcare cost management strategies.
- Health Insurance Issuers: For fully insured plans, the insurance companies or issuers pay the PCORI fee. These costs may be passed on to the policyholders in the form of increased premiums.
- Employees and Individuals: While individuals and employees do not directly pay the PCORI fee, they may indirectly bear the burden through potential premium increases or cost-sharing adjustments implemented by employers or health insurance issuers.
Conclusion:
The PCORI fee plays a crucial role in funding research conducted by the Patient-Centered Outcomes Research Institute, which aims to improve healthcare outcomes by comparing the effectiveness of different treatments and interventions. While the fee is primarily paid by health insurance issuers or plan sponsors, its impact may indirectly affect employers, individuals, and employees through potential changes in premiums or cost-sharing arrangements. Understanding the PCORI fee helps stakeholders navigate the complex landscape of healthcare costs and decision-making based on evidence-based research.
