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Patient-Centered Outcome Research Institute (PCORI) Fees are Due by July 31

The Affordable Care Act (ACA) imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute (PCORI).

This fee is nothing new; it applies to policy or plan years ending on or after October 1, 2012, and before October 1, 2029.

Self-insured plans include health reimbursement arrangements (HRAs) and level-funded arrangements. For more information on whether a type of insurance coverage or arrangement is subject to the fee, the IRS has provided this useful chart.

Fees must be paid by the plan sponsor and not by the plan or with plan assets. Applicable rates may be found here.

Self-insured plan sponsors can satisfy their compliance obligations by completing and filing Form 720, with its accompanying 720-V payment voucher. Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31. Form 720 may be found here.

Plan sponsors of self-insured health plans and health insurers must pay fees equal to the applicable fee times the average number of covered lives. Self-insured plan sponsors can calculate the average number of covered lives using either:

Actual Count Method

This cumbersome method requires a plan sponsor to count the actual covered lives on each day of the plan year and divide by the number of days in the plan year.

Snapshot Method

Choose one or more days during each calendar quarter, add the covered lives on those dates and divide by the number of dates used. Sponsors must use the same number of dates in each quarter, and the dates must be within three days of the comparable date in the other quarters. Note that a plan sponsor also may use a snapshot factor that counts the actual number of participants with individual coverage, plus 2.35 times the number of participants with other than individual coverage.

5500 Method

Sponsors who offer only individual coverage take the number of participants reported at the beginning of the plan year, plus the number reported at the end of the plan year and divide by two. Plan sponsors who offer coverage other than individual coverage must take the number of participants reported at the beginning of the plan year, plus the number reported at the end of the plan year. Sponsors wanting to use this method should be sure the relevant Form 5500 will be filed by July 31 – extensions are not permitted.

Self-insured sponsors must pay PCORI fees for participants covered through COBRA coverage, retiree-only coverage and certain HRA coverage.

If a plan sponsor offers a stand-alone HRA, it must use one of the methods above to count the average number of covered lives. Plan sponsors of an HRA integrated with an insured plan will pay a separate PCORI fee on the HRA covered lives, even though the insurer will pay for the covered lives under the insured plan. Plan sponsors of an HRA integrated with a non-account self-insured plan must report and pay PCORI fees, but do not have to double count folks in the HRA and the self-insured plan. If you sponsor only an HRA with no group health plan, the employer pays the fee on the HRA.

Health Care Reform requires insurers to report and submit PCORI fees for fully insured plans. Thus, insured plan sponsors have no independent reporting obligation and will simply reimburse the insurers, who presumably will bill plan sponsors upon remitting PCORI fees to IRS.

If you have questions about PCORI fees and accompanying requirements, contact your OneDigital consultant or OneDigital's Compliance Consulting Team.