PCORI Fees Due July 31, 2019

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The Affordable Care Act requires health insurance issuers and sponsors of self-insured health plans to pay Patient-Centered Outcomes Research Institute (PCORI) fees.  PCORI fees are due July 31, 2019, for plan years ending in 2018.

Employers or plan sponsors will pay the fee on applicable self-insured plans, including Health Reimbursement Arrangements (HRA).  Health insurance issuers (insurance carriers) will pay the fee on fully insured plans.

  • Form 720, Quarterly Federal Excise Tax Return, is available here.

  • Instructions for filing Form 720 are available here.

  • Information from the IRS on the methods of determining the average number of lives covered under applicable self-insured health plans for the plan year is available here.

  • Q&A by the IRS on the PCORI fees is available here.

  • Chart of Common Health Coverages and whether Subject to Fee is available here.

REPORTING & ASSOCIATED FEES
The PCORI fee applies to specified health insurance policies with policy years ending after Sept. 30, 2012, and before Oct.1, 2019, and applicable self-insured health plans with plan years ending after Sept. 30, 2012, and before Oct. 1, 2019.

The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year.

Using Part II, Number 133 of Form 720, issuers and plan sponsors will be required to report the average number of lives covered under the plan separately for specified health insurance policies and applicable self-insured health plans. That number is then multiplied by the applicable rate for that tax year, as follows:

  • $2.39 per year per participant for plan year ending between Oct. 1, 2017, and Sept. 30, 2018.

  • $2.45 per year per participant for plan year ending between Oct. 1, 2018, and Dec. 31 2018.

Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year: (1) actual count method, (2) snapshot method, or (3) Form 5500 method.

Generally, all individuals who are covered during the policy year or plan year must be counted in computing the average number of lives covered for that year. Thus, for example, an applicable self-insured health plan must count an employee and his dependent child as two separate covered lives unless the plan is a health reimbursement arrangement (HRA) or flexible spending arrangement (FSA).

If an employer provides COBRA coverage or otherwise provides coverage to its retirees or other former employees, these covered individuals and their beneficiaries must be taken into account in calculating the average number of lives covered.

Issuers and plan sponsors who are required to pay the PCORI fee but are not required to report any other liabilities on a Form 720 will be required to file a Form 720 only once a year. They will not be required to file a Form 720 for the other quarters of the year.

Issuers and plan sponsors who are required to pay the PCORI fee as well as other liabilities on a Form 720 will use their Form 720 for the 2nd quarter to report and pay the PCORI fee that is due July 31. Only one Form 720 should be filed for each quarter.

SPECIAL RULES FOR HRAs
The IRS issued final regulations that address how PCORI fees apply to HRAs.

  • If the only applicable self-insured plan offered by the employer is an HRA: The plan sponsor may treat each participant’s HRA as covering a single life (and will not have to count spouses or dependents).

  • HRA integrated with self-insured plan: The plan sponsor of an HRA administered by an entity that is different from their self-insured plan will be subject to two separate research fees. If both the HRA and the self-insured plan are administered by the same entity, the plan sponsor is not subject to a separate research fee. The plans must also have the same plan year.

  • HRA integrated with fully-insured plan: The plan sponsor of the HRA and the issuer of the insured plan will both be subject to the research fees, even though the HRA and insured group health plan are maintained by the same plan sponsor.

Coverage that consists solely of “excepted benefits” under HIPAA is not subject to the PCORI fee (i.e., stand-alone dental and vision plans, accident-only coverage, disability income coverage, liability insurance, workers’ compensation coverage, credit-only insurance or coverage for on-site medical clinics). Thus, plan sponsors of HRAs will not be required to pay PCORI fees if substantially all of the coverage is considered excepted benefits.

CORRECTIONS & AMENDMENTS
Plan sponsors and policy issuers cannot reduce the PCORI fee due July 31 for any overpayment from a prior year. If a plan sponsor or policy issuer overpaid the PCORI fee reported on a previously filed Form 720, it should file Form 720X, Amended Quarterly Federal Excise Tax Return, for an overpayment of a previously filed PCORI liability.

MORE INFORMATION
For additional information on the PCORI fees, contact your Caravus advisor.

 
Robby Baker