The Affordable Care Act includes a fee to be paid by sponsors of self-insured health plans to fund the Patient-Centered Outcomes Research Institute (PCORI).
Employers offering a self-insured medical reimbursement health plan, such as Health Reimbursement Account or Healthcare Reimbursement Plan, may be responsible to pay the fee.
Applicable employers are required to report and pay the PCORI research fees annually via Form 720, due by July 31 of each year.
With the deadline approaching, this article covers common questions and answers about the PCORI fee and Form 720.
Q. Who Owes a PCORI Fee?
A. If your company offers a self-insured health plan, such as Health Reimbursement Account or Healthcare Reimbursement Plan, with a plan year ending on or after October 1, 2012 and before October 1, 2019, the Patient-Centered Outcomes Research Institute (PCORI) fee may apply.
Q. How Much is the PCORI Fee?
A. The PCORI fee is tabulated as follows:
Plan year ending October 1, 2013 – September 30, 2014: $2 multiplied by the average number of lives.
Plan year ending October 1, 2014 – September 30, 2015: $2.08 multiplied by the average number of lives.
Q. How to Calculate the PCORI "Number of Lives"
A. According to Form 720 instructions, there the three ways to count the "number of lives." Here's what the instructions state:
The actual count method. For policy years that end on or after October 1, 2012, issuers using the actual count method may begin counting lives covered under a policy as of May 14, 2012, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year.
The snapshot method. For policy years that end on or after October 1, 2012, but that began before May 14, 2012, issuers using the snapshot method may use counts from quarters beginning on or after May 14, 2012, to determine the average number of lives covered under the policy.
Form 5500 method. The member months data and the data reported on state forms are based on the calendar year. To adjust for 2012, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2012. For example, issuers using the member months number for 2012 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2012.
Tip: If you use a health reimbursement software, such as ZaneHealth, look for IRS reporting tools in your online account.
Q. Does Our Business Need to Submit IRS Form 720?
A. If you owe a PCORI fee for 2014, it must be paid using IRS Form 720 by July 31, 2015. For the purposes of self-insured health plans, see Part II, IRS No. 133 (b) of the form. If your business does not owe a PCORI fee, IRS Form 720 does not need to be completed.
If you currently file Form 720, the fee is to be paid with your second quarter return. If you do not file Form 720, file only the return for the second quarter (not quarterly).
For applicable employers, the deadline to submit IRS Form 720 and pay PCORI fees is July 31. Questions about Form 720 or the PCORI fees? Leave a question below. We’d be happy to answer.