The July 31 deadline for paying the Patient-Centered Outcomes Research Institute (PCORI) fee required under the Affordable Care Act (ACA) is quickly approaching. The PCORI fee is imposed on sponsors of self-insured plans and health insurance issuers to help finance the PCORI, which was established by the ACA. The fee applies to plan years ending on or after October 1, 2012 and is due no later than July 31 of the year immediately following the last day of the plan year. As a result, the first PCORI payments for 2012 calendar year self-insured plans are due by July 31, 2013.
The PCORI fee is $2 ($1 for policy years ending before October 1, 2013) multiplied by the average number of lives covered under the plan. Lives covered include the participant, the participant's spouse and dependents covered under the plan. Individuals covered under the Consolidated Omnibus Budget Reconciliation Act (COBRA) (and other types of continuation coverage) and individuals with retiree coverage are counted as well.
Certain plans are exempt from paying the PCORI fee, including employee assistance plans, disease management and wellness programs, as long as these programs do not provide significant benefits in the nature of medical care or treatment. Additionally, the rule does not apply to excepted benefits as defined under the Health Insurance Portability and Accountability Act.
The final regulations regarding the calculation of the PCORI fee were issued by the Internal Revenue Service in December 2012. In accordance with the final regulations, plan sponsors can use one of three methods to determine the number of lives covered under the plan. These include the:
Actual count method;
Snapshot method; or
Form 5500 method.
A plan sponsor is required to use one method to determine the number of lives covered under the plan for the entire plan year, but may use a different method from one plan year to the next.
Plan sponsors are required to use IRS Form 720, Quarterly Federal Excise Tax Return, for reporting and paying the PCORI fee. The Form 720 was recently updated to include two new lines for reporting and paying the PCORI fee: 1) for sponsors of self-insured health plans; and 2) for health insurance issuers. Although the form is titled Quarterly, and is typically used for quarterly payments of certain excise taxes, the PCORI fee is only paid annually.