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New PCORI Fee Amounts Announced for the 2022 Reporting Period

December 23 - Posted at 8:30 AM Tagged: , , ,

The IRS just released IRS Notice 2022-04 that provides the updated fee for Patient-Centered Outcomes Research Institute (PCORI) paid by fully insured and self-funded health plans for the upcoming tax reporting period.

Even though the original PCORI fee assessments under the Affordable Care Act were scheduled to end after September 30, 2019, Congress extended these fees to be assessed by the IRS under the Further Consolidated Appropriations Act of 2020 for another ten years, until at least September 30, 2029.

The updated PCORI fee is now $2.79 per covered life for all plan years ending on or after October 1, 2021, and before October 1, 2022, up from $2.66 for the prior period.  As a reminder, fully insured plans are to be assessed the applicable PCORI fee amount through their monthly premium payments made to their health insurance carrier.  Self-insured plans pay this fee as part of the annual IRS Form 720 filing due by July 31 of each year.

PCORI Fee Increases to $2.66 for 2020 Calendar Year Plans

June 09 - Posted at 10:00 AM Tagged: , , ,

The IRS has released IRS Notice 2020-84 providing the adjusted $2.66 Patient-Centered Outcomes Research Institute (PCORI) fee per covered individual for health plan years ending on or after October 1, 2020 and before October 1, 2021, which includes 2020 calendar plan years.  The fee has increased $0.12 per covered individual from last year (from $2.54).

As detailed in last year’s alert, Congress surprisingly extended the PCORI fee for another decade (until 2029). Despite the originally scheduled sunsetting of the fee in the 2019 filing (for calendar plan years), PCORI filings are now here to stay as a summer staple for the foreseeable future.

The annual PCORI fee must be reported and paid to the IRS by August 2, 2021 via the second quarter Form 720

What is the PCORI Fee Used For?

The fee is imposed on health insurance issuers and self-insured health plan sponsors in order to fund the Patient-Centered Outcomes Research Institute (PCORI).  The mission of the institute is to improve healthcare delivery and outcomes by producing and promoting high-integrity evidence-based information that comes from research guided by patients, caregivers and the broader health community.

The institute currently maintains a robust portfolio of patient-centered outcomes research that addresses a variety of high priority conditions and topics.

PCORI research projects are also targeting certain populations of interest such as: racial and ethnic minorities, low socioeconomic status, women, older adults and individuals with multiple chronic conditions.  The PCORI website lists current and completed research projects as well as outcomes.

Who Needs to Pay the PCORI Fee?

Fully Insured Medical Plans:  Health Insurers (aka insurance carriers) are responsible for paying the fee on fully insured health policies.  This fee is built into the insurance premium, so there is no action required by employers.

Self-Insured Medical Plans (Including HRAs): The plan sponsor (aka the employer) is responsible for paying the PCORI fee for self-insured health plans.   Self-insured plans include so-called “level funded” plans. The employer must file the Form 720 and pay the fee.

To Which Plans Does the PCORI Fee Apply?

The PCORI fee generally applies only to major medical plans and health reimbursement arrangements (HRAs).  (See below for an exception that applies to many HRAs.)

The PCORI fee does not apply to dental and vision coverage that are excepted benefits (whether through a stand-alone insurance policy or meeting the “not integral” test for self-insured coverage).   Virtually all dental and vision plans are excepted benefits. 

The PCORI fee also does not apply to health FSAs (which must be an excepted benefit to comply with the ACA) or HSAs (which are not a group health plan).

For a quick reference guide, the IRS has published a table which summarizes the applicability of the fee to common types of health and welfare benefits.

Does the PCORI Fee Apply to HRAs?

Yes, an HRA is a self-insured health plan.  However, the PCORI rules provide an exception to the fee requirement for an HRA where it is offered along with a self-insured major medical plan that has the same plan year as the HRA.  This avoids the need to pay the PCORI fee for both the HRA and the self-insured major medical plan (i.e., each person covered by both plans is counted only once for purposes of determining the PCORI fee).

There is no exception from the PCORI fee for an HRA offered along with fully insured major medical coverage.  While the insurance carrier is responsible for paying the PCORI fee for the fully insured medical plan, the employer is responsible for paying the PCORI fee on the HRA.   The IRS is essentially double-dipping in this scenario by imposing the PCORI fee on the same lives covered by both the major medical and the HRA.  In recognition of this, the HRA PCORI fee paid by the employer is determined by counting only one life per employee participating in the plan (and not dependents).

Summary: The PCORI fee is required for an HRA unless it is paired with a self-insured major medical plan that has the same plan year as the HRA.  Where the PCORI fee is required, the employer is responsible for filing the Form 720 and paying the PCORI fee for an HRA solely for the covered employees (not dependents).

How is the PCORI Fee Calculated?

Plan Sponsors of self-insured health plans (other than an HRA) calculate the fee based on the average number of total lives covered by the plan (both employees and dependents).

Plan Sponsors can use one of three alternative methods which are summarized by the IRS in its PCORI fee homepage and PCORI fee FAQs:

  • Actual count method
  • Snapshot method
  • Form 5500 method

Upon reinstatement of the fee in 2020, the IRS allowed plan sponsors an alternative method of calculating the average number of covered lives.  Plan sponsors were able to use any reasonable method to calculate the average number of covered lives.  This guidance was not extended to the 2021 filing, and employers must use one of the above three methods.

How Much Do I Need to Pay on the July 2021 Form 720?

  • Plan Years Ending January 2020 – September 2020: $2.54 per covered life (including spouses/dependents)
  • Plan Years Ending October 2020– December 2020: $2.66 per covered life (including spouses/dependents)

For calendar plan years, the applicable rate for the 2020 plan year will be $2.66 per covered life.

Employers filing for a self-insured medical plan should keep in mind that the plan year is the ERISA plan year reflected in the plan document, SPD, and Form 5500 (if applicable).  The PCORI fee also applies to short plan years, defined as any plan year less than 12 months.

The fee is due July 31st (August 2nd in 2021) of the year following the last day of the plan year, including short plan years.

Examples

  • Employer with a calendar plan year first changes to a self-insured medical plan (including level funded) effective January 1, 2021. Employer must file the first Form 720 to pay the PCORI fee in July 2022 based on the TBD PCORI rate for next year.
  • Employer with a July 1 plan year first changes to a self-insured medical plan (including level funded) effective July 1, 2020. Employer must file the first Form 720 to pay the PCORI fee of $2.66 per covered life in July 2022.
  • Employer with a self-insured medical plan has short plan year from July 1, 2020 through December 31, 2020 to transition to a calendar plan year as of 2021. Employer must file the Form 720 in July 2021 to pay the PCORI fee for both the full plan year ending June 2020 ($2.54 per covered life) and the short plan year ending December 2020 ($2.66 per covered life). The PCORI fee amount is prorated for the short plan year, as detailed in the IRS PCORI Fee FAQ.

The IRS has published a table of the applicable filing deadline and rate for each plan year ending date.

How do we file the PCORI fee?

The PCORI fee is filed on the second quarter IRS Form 720, which is due by August 2, 2021 (July 31st is a Saturday in 2021).  Consult the IRS Instructions for Form 720 for direction on completing the form (see pages 8-9).

 

 

PCORI Fee Reminders and Clarifications

June 15 - Posted at 11:48 AM Tagged: , , , ,

IRS Notice 2020-44 was issued last week as a reminder that Patient-Centered Outcomes Research Institute (PCORI) fees were extended under the Further Consolidated Appropriations Act of 2020 and are now not scheduled to expire until plan years ending after September 30, 2029.  Annual PCORI fees will still need to be paid by insurers for employers with fully insured group health plans (and will remain to be included in annual premiums). Groups that offer self-insured plans  are responsible for filing and paying the fee on IRS Forms 720, which must be filed by July 31 each year.

The IRS Notice also clarifies there is still a filing obligation owed for all such group health plan filings for plan years ending on or after October 1, 2019, and before October 1, 2020, with the PCORI Fee amount being $2.54 (up from $2.45 for the previous PCORI fee period).  However, the guidance recognizes that insurers and self-funded plan sponsors may not have been accurately tracking the number of covered lives to be reported and paid for the plan year periods from October 1, 2019, through October 1, 2020, because the previous PCORI fee assessments under the Affordable Care Act were scheduled to end after September 30, 2019.  To allow for ease in current reporting of covered lives information, the Notice clarifies that in addition to the other statutory methods of reporting covered lives, for the PCORI reporting periods for plan years ending from October 1, 2019, through October 1, 2020, the IRS will allow insurers and plan sponsors to use a “reasonable” method to calculate the average number of covered lives for this period.

Impact on Employers

Employers with fully insured health plan coverage provided by an insurance carrier may see a slight increase in future insurance premiums to account for this recent update from the IRS.  Self-funded health plan sponsors need to ensure they timely file their annual Form 720 by July 31, 2020, using the appropriate PCORI fee amount (i.e., $2.45 per covered life for plan years ending on or before September 30, 2019, or $2.54 per covered life for plan years ending on or after October 1, 2019), based on the calculated covered lives formula alternatives (e.g., actual count method, snapshot method, Form 5500 method, or for the October 1, 2019, through October 1, 2020, periods, a “reasonable” method for average covered lives).

PCORI Fee Due by July 31, 2019

June 06 - Posted at 2:00 PM Tagged: , , , ,

The Patient-Centered Outcomes Research Institute (PCORI) fee for 2018 is due by July 31, 2019. For groups whose plan year ended December 31, 2018 this will be the final PCORI payment they will have to make. Health plans whose plan year ended after December 31, 2018, but before October 1, 2019, will still have one final PCORI payment that will be due by July 31, 2020. 

The PCORI fee is imposed under the Affordable Care Act (ACA) on issuers of certain health insurance policies and self-insured health plan sponsors to help fund the research institute. The fee amount is based on the average number of covered lives under the policy or plan, and the total (along with the fee) must be reported annually on the second quarter IRS Form 720 (Quarterly Federal Excise Tax Return) and paid by July 31. The fee due July 31, 2019 is calculated as $2.45 per covered life. Plan sponsors must pay the PCORI fee by July 31 of the calendar year immediately following the calendar year in which the plan year ends.

For fully insured health plans, the insurance carrier files Form 720 and pays the PCORI fee. So, employers with fully insured health plans have no filing requirement (but will be charged by the carrier for the fee). Employers that sponsor self-insured health plans are responsible for filing Form 720 and paying their due PCORI fee. For self-insured plans with multiple employers, the named plan sponsor is generally required to file Form 720.

The fee may not be paid from plan assets, so it must be paid out of the sponsor’s general assets. According to the IRS, however, the fee is a tax-deductible business expense for employers with self-insured plans.

PCORI Fee Payment Due July 31st

June 05 - Posted at 2:00 PM Tagged: , , , , , , , , ,

The Affordable Care Act (ACA) created PCORI to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. PCORI’s research is to be funded, in part, by fees paid by either health insurers or sponsors of self-insured health plans. These fees are widely known as PCORI fees. Health insurers and self-insured plan sponsors are required to report and pay PCORI fees annually using IRS Form 720 (Quarterly Federal Excise Tax Return). The report and fees are due on July 31st with respect to the plan year that ended during the preceding calendar year. For instance, for calendar year plans, the fee that is due July 31, 2018 applies to the plan year that ended December 31, 2017.

Reporting PCORI fees on Form 720

Form 720 and completion instructions are posted on the IRS’ website. Insurers and self-insured plan sponsors must report the average number of lives covered under the plan. For fully insured plans, the carrier is responsible for reporting and paying the fee on the employers behalf. For a self-insured plan, the plan sponsor (employer) enters information for “self-insured health plans.” The number of covered lives is then multiplied by the applicable rate based on the plan year end date. Form 720 that is due July 31, 2018, will reflect payment for plan years ending in 2017. The applicable rate depends on the plan year end date:

  • $2.26 for plan years ending between January 1, 2017 and September 30, 2017
  • $2.39 for plan years ending between October 1, 2017 and December 31, 2017

The applicable rate may increase for inflation in future years. However, the program ends in 2019 and PCORI fees will not apply for plan years ending after September 30, 2019. Insurers or self-insured plan sponsors that file Form 720 only for the purpose of reporting PCORI fees do not need to file Form 720 for the first, third or fourth quarter of the year. Insurers or self-insured plan sponsors that file Form 720 to report quarterly excise tax liability (for example, to report the foreign insurance tax) should enter a PCORI fee amount only on the second quarter filing. See below for more information about affected plans and methods for calculating the number of participants and amount of the required PCORI fee.
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New Indexed PCORI Fee Issued

November 01 - Posted at 8:33 AM Tagged: , , , , , , , , , , ,

Under the Affordable Care Act, (ACA) a fund for a new nonprofit corporation to assist in clinical effectiveness research was created. To aid in the financial support for this endeavor, certain health insurance carriers and health plan sponsors are required to pay fees based on the average number of lives covered by welfare benefits plans. These fees are referred to as either Patient-Centered Outcome Research Institute (PCORI) or Clinical Effectiveness Research (CER) fees.

The applicable fee was $2.26 for plan years ending on or after October 1, 2016 and before October 1, 2017.  For plan years ending on or after October 1, 2017 and before October 1, 2018, the fee is $2.39.  Indexed each year, the fee amount is determined by the value of national health expenditures. The fee phases out and will not apply to plan years ending after September 30, 2019.

As a reminder, fees are required for all group health plans including Health Reimbursement Arrangements (HRAs), but are not required for health flexible spending accounts (FSAs) that are considered excepted benefits. To be an excepted benefit, health FSA participants must be eligible for their employer’s group health insurance plan and may include employer contributions in addition to employee salary reductions. However, the employer contributions may only be $500 per participant or up to a dollar for dollar match of each participant’s election.

HRAs exempt from other regulations would be subject to the CER fee. For instance, an HRA that only covered retirees would be subject to this fee, but those covering dental or vision expenses only would not be, nor would employee  EAPs, disease management programs and wellness programs be required to pay CER fees.

PCORI Filing Due to IRS by July 31st

July 31 - Posted at 1:19 PM Tagged: , , , , , , ,

The health reform law imposes a number of fees, taxes and other assessments on health insurance companies and sponsors of self-funded health plans to help subsidize a number of endeavors. One such fee funds the Patient-Centered Outcomes Research Institute (PCORI).

The PCORI fee for calendar year plans is $2.26 per covered life for the 2016 plan year, and must be reported on (and remitted with) IRS Form 720 by July 31, 2017. For non-calendar year plans, if the 2015-16 plan year ended on or before Sept. 30, 2016, the fee is $2.17 per covered life. If the 2015-16 plan year ended between Oct. 1 and Dec. 31, 2016, the fee is $2.26 per covered life. In either case, the filings are similarly due by July 31, 2017. (Note: The Form 720 must be filed by July 31 of the calendar year that begins after the last day of the plan year.)

For self-funded plans, the employer/plan sponsor will be responsible for submitting the fee and accompanying paperwork to the IRS. Third-party reporting and payment of the fee is not permitted for self-funded plans. The process for remitting payment by sponsors of self-funded plans is described in more detail below.

PCORI Fee Reporting and Payment

The IRS will collect the fee from the insurer or, in the case of self-funded plans, the plan sponsor/employer in the same way many other excise taxes are collected. IRS regulations provide three options for determining the average number of covered lives (actual count, snapshot and Form 5500 method).

The U.S. Department of Labor believes the fee cannot be paid from plan assets. In other words, the PCORI fee must be paid by the plan sponsor; it is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions. The IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans.

How to File IRS Form 720

The filing and remittance process to the IRS is straightforward and largely unchanged from last year. On page two of Form 720, under Part II, the employer needs to designate the average number of covered lives under its “applicable self-insured plan.” The number of covered lives is multiplied by the applicable amount ($2.26 or $2.17) to determine the total fee owed to the IRS. The Payment Voucher (720-V) should indicate the tax period for the fee is “2nd Quarter.” Failure to properly designate “2nd Quarter” on the voucher will result in the IRS’s software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with IRS.

PCORI Filing Due to IRS by Aug. 1

June 09 - Posted at 1:54 PM Tagged: , , , , , , , , , ,

The health reform law imposes a number of fees, taxes and other assessments on health insurance companies and sponsors of self-funded health plans to help subsidize a number of endeavors. One such fee funds the Patient-Centered Outcomes Research Institute (PCORI).


The PCORI fee is $2.17 per covered life for plan years ending on or after Oct. 1, 2015, and must be reported on (and remitted with) IRS Form 720 by Aug. 1, 2016 (the deadline is July 31, but since July 31 falls on a weekend, the form is due by the next business day, Aug. 1). For self-funded plans, the employer/plan sponsor will be responsible for submitting the fee and accompanying paperwork to the IRS. Third-party reporting and payment of the fee is not permitted for self-funded plans.


The process for remitting payment by sponsors of self-funded plans is described in more detail below.

PCORI Fee Reporting and Payment


The IRS will collect the fee from the insurer or, in the case of self-funded plans, the plan sponsor in the same way many other excise taxes are collected. The fees are reported and paid annually on IRS Form 720 by July 31 of the year following the last day of the plan year. This year the fee is due by Aug. 1.


The fee due on Aug. 1, 2016 is $2.17 per covered life for plan years ending before Oct. 1, 2016, and on or after Oct. 1, 2015. For plan years ending before Oct. 1, 2015, the fee due on Aug. 1, 2016, is $2.08 per covered life under the plan. IRS regulations provide three options for determining the average number of covered lives (actual count, snapshot and Form 5500 method).


The Form 720 must be filed by July 31 (Aug. 1 in 2016) of the calendar year immediately following the last day of the plan year. For example, calendar year plans will owe a fee of $2.17 per covered life by Aug. 1, 2016. Plans that operate on years that begin the first day of any month from February through October will be paying a $2.08 per covered life fee with the Aug. 1, 2016, filing.


The U.S. Department of Labor believes the fee cannot be paid from plan assets. In other words, the PCORI fee must be paid by the plan sponsor; it is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions. The PCORI expense should not be included in the plan’s cost when computing the plan’s COBRA premium. The IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans.


How to File IRS Form 720


The filing and remittance process to the IRS is straightforward and is largely unchanged from last year. On page two of Form 720, under Part II, the employer needs to designate the average number of covered lives under its “applicable self-insured plan.” The number of covered lives is multiplied by $2.17 (for plan years ending on or after Oct. 1, 2015) to determine the total fee owed to the IRS.


The Payment Voucher (720-V) should indicate the tax period for the fee is “2nd Quarter.” Failure to properly designate “2nd Quarter” on the voucher will result in the IRS’s software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with IRS.

IRS Adjusted ACA Fee Amounts Released for the 2015-2016 Plan Year

October 26 - Posted at 5:26 PM Tagged: , , , , , , , ,

The Patient-Centered Outcomes Research Institute (PCORI) fee was established under the Affordable Care Act (ACA) to advance comparative clinical effectiveness research. The PCORI fee is assessed on issuers of health insurance policies and sponsors of self-insured health plans. The fees are calculated using the average number of lives covered under the policy or plan, and the applicable dollar amount for that policy or plan year. The past PCORI fees were—


  • $2 per life, for policy and plan years ending on or after October 1, 2013, and before October 1, 2014
  • $2.08 per life, for policy and plan years ending on or after October 1, 2014, and before October 1, 2015


The new adjusted PCORI fee is—

  • $2.17 per life, for policy and plan years ending on or after October 1, 2015, and before October 1, 2016


Employers and insurers will need to file Internal Revenue Service (IRS) Form 720  and pay the updated PCORI fee by July 31, 2016


Transitional Reinsurance Fee

Like the PCORI fee, the transitional reinsurance fee was established under the ACA. It was designed to reinsure the marketplace exchanges. Contributing entities are required to make contributions towards these reinsurance payments. A “contributing entity” is defined as an insurer or third-party administrator on behalf of a self-insured group health plan. The past transitional reinsurance fees were


  • $63 per covered life for 2014
  • $44 per covered life for 2015


The new adjusted transition reinsurance fee is—

  • $27 per covered life for 2016

November 15th Deadline Quickly Approaching on ACA Transitional Reinsurance Fee

November 05 - Posted at 3:01 PM Tagged: , , , , , , , , , , , , , , ,

The deadline for submitting the required information and scheduling the requirement payment, which must be done through www.pay.gov is November 15, 2014.

 

The Affordable Care Act (ACA) provides for a transitional reinsurance program to help stabilize premiums for coverage in the individual health insurance marketplace during the first 3 years of operation (2014-2016). The program is designed to primarily transfer funds from the group market to the individual market, where high risk individuals are more likely to be covered.

 

Payments under the reinsurance program are funded by “contributions” (aka fees) payable by health insurance carriers for fully funded groups and third party administrators on behalf of self-insured group health plans. However, under ACA regulations, the self insured group is ultimately responsible for the payment.

 

The transitional reinsurance fee requirement applies on a per capita basis with respect to each individual covered by a plan that is subject to the fee. The total amount of the fee for 2014 is $63 per covered life and will decrease to $44 per covered life in 2015. The amount of the fee in 2016 has not yet been established by CMS, but will be lower than the 2015 amount.  The fee applies to major medical coverage, retiree medical coverage, and COBRA coverage. Plans that are not subject to the reinsurance fee include FSAs, HSAs, Dental & Vision coverage, coverage that fails to provide minimum value, and EAP programs to name a few.

 

The transitional reinsurance fee is imposed on the “contributing entity”, defined as an insurer/carrier for fully-insured coverage or the group for self insured coverage. Third -party administrators (TPAs), administrative service only entities (ASO) and others may submit on behalf of the contributing entity, though CMS has specified that the TPA or ASO is not required by law to do so.

 

Because the fee is imposed on the self insured plan and not the plan sponsor, plan assets may be used to pay the assessment/fee. The IRS has also noted that plan sponsors can treat the fee as an ordinary and necessary business expense for tax purposes.

 

The term covered lives includes everyone under the plan, including spouses, dependents, and retirees. CMS has named several options for counting covered lives, depending on if the plan is fully insured or self funded. The methods of counting covered lives for the reinsurance fee are similar to, but not exactly the same, as the Patient Centered Outcomes Research Institute (PCORI) count methods. A full description of each counting method can be found on the CMS website here.

 

Regardless of the counting method chosen, plans must maintain documentation of the count, including all materials provided by TPAs in arriving at the figure, for at least 10 years. CMS may audit a plan to assess its compliance with the program requirements and it will be crucial to be able to produce this information.

 

The entire reinsurance fee process takes place on www.pay.gov. This process is separate from the Health Insurance Oversight System (HIOS) which is used, for example, to obtain a Health Plan Identifier (HPID). The applicable form became available on October 24, 2014. While this leaves somewhat limited time for plan sponsors to submit the applicable form and schedule the fee by the November 15, 2014 deadline, CMS has yet to issue guidance that the submission date will be delayed.

 

In order to successfully complete the reinsurance fee submission, plan sponsors (or their representatives) need to:

 

  • Register on Pay.gov
  • Fill out the Transitional Reinsurance Form
  • Attach a supporting documentation file, and
  • Schedule a reinsurance payment

 

After registering on Pay.gov, the submitter will select the Transitional Reinsurance program Annual Enrollment and Contribution Submission Form. The form requires basic company and contact info, payment type, benefit year, and the annual enrollment count. After the information is entered on the form, plan sponsors will need to upload their supporting documentation CSV file. After the enrollment and supporting documentation is submitted, the form will auto-calculate the amount owed. Plans then need to schedule payment(s) for this amount . The form cannot be submitted without payment information. Plans can choose to remit payment for the entire benefit year once (the full $63 per covered life) or plans can submit two separate payments for the year. If  the separate payment method is used, the first payment ($52.50 per covered life) is due by January 15, 2015 and the second payment ($10.50 per covered life) is due by November 15, 2015. Regardless of the option chose, all payments MUST be scheduled by November 15, 2014. 

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