Healthcare reform created a new nonprofit corporation, the Patient Centered Outcomes Research Institute (PCORI), to support clinical effectiveness research. This entity will be funded in part by fees (sometimes referred to as “PCOR fees,” “PCORI fees,” or “CER fees”) paid by certain health insurers and applicable sponsors of self-insured health plans. It is intended to help patients, clinicians, purchasers, and policymakers make informed healthcare decisions by advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings.
What is the effective date?
The PCORI Fee applies to policy and plan years ending after October 1, 2012 and before October 1, 2019 (i.e., for seven full policy or plan years). For calendar-year policies/plans, the fees would apply for calendar policy/plan years 2012 through 2018.
Who has to file?
- Medical plans
- Prescription drug plans
- Self-insured dental or vision plans, if provided without a separate election or premium charge
- Some Hhealthcare FSAs
- Retiree-only health plans of the types listed above (even though exempt from other PPACA mandates)
- Health plans of the types listed above provided by governmental employers for their employees
Who is exempt from the fee?
- Separately-insured dental or vision plans
- Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions
- Expatriate coverage provided primarily for employees who work and reside outside of the U.S.
- Most healthcare FSAs
- EAPs, wellness programs, and disease management programs that do not provide "significant benefits in the nature of medical care or treatment"
How is the fee filed?
- Fees are to be reported and paid once a year, even though they are reported on IRS Form 720 (Quarterly Federal Excise Tax Return). Reports and payments are due no later than July 31 of the year following the last day of the policy or plan year.
How much is the PCORI Fee?
- Plan years ending before 10/1/13 - $1 X number of covered individuals
- Plan years ending between 10/1/13 and 9/30/15 - $2 x number of covered individuals
- Plan years ending between 10/1/15 and 9/30/16 - $2.17 x number of covered individuals
- Plan years ending between 10/1/16 and 9/30/17 - $2.26 x number of covered individuals
- Plan years ending between 10/1/17 and 9/30/18 - $2.39 x number of covered individuals
- Plan years ending between 10/1/18 and 9/30/19 - $2.45* x number of covered individuals
*No fee for plan years ending on or after 10/1/19.
The regulations provide plan sponsors with self-insured plans a choice to use any of three alternative methods when calculating the PCOR fee. Plan sponsors may only apply a single method in determining the average number of lives covered under the plan for the entire plan year; however, a sponsor is not required to use the same method from one plan year to the next.
- Method 1: Actual Count Method
A sponsor may determine the average number of lives covered under the plan for the plan year by calculating the sum of the lives covered for each day of the plan year and dividing that sum by the number of days in the plan year.
- Method 2: Snapshot Method
A plan sponsor may determine the average number of lives covered under the plan for the plan year by adding the totals of lives covered on a date during the first, second, or third month in each quarter, or an equal number of dates for each quarter, and dividing the total by the number of dates on which a count was made. Like the snapshot method for insured plans, the regulations do not require that a specific date be used for each month or quarter, but do provide specific rules to ensure that similar dates are used each month.
- Method 3: Form 5500 Method
A sponsor may determine the average number of lives covered under the plan for the plan year based on a formula that includes the number of participants actually reported on the Form 5500 for the plan year. A plan sponsor may only use this method if the Form 5500 is filed no later than the due date for the fee imposed for that plan year. Under this method, the total number of lives is determined by simply adding the total participant counts at the beginning and end of the year and dividing by 2 for a plan that only offers single coverage.
We have a self-insured plan that is offered in conjunction with our HRA. Do we pay the fee twice?
IRS will not impose the fee on HRAs which are integrated with another self-insured plan (such as a self-insured, in-house health plan) offered by the same plan sponsor, since this would result in a "double-payment" of the fee. Unfortunately, this exception does not apply to HRAs offered to employees in conjunction with typical insurance plans (often referred to as "integrated HRAs") because—according to IRS—PPACA's statutory structure treats insured plans and self-insured plans separately.
For a detailed description of exempt and non-exempt plans, how to calculate the fees and more please visit the IRS website: