The Affordable Care Act imposes a fee on issuers of health insurance policies and plan sponsors of applicable self-insured health plans including stand-alone Health Reimbursement Arrangements or HRAs, to help fund the Patient-Centered Outcomes Research Institute. The fee or PCORI fee, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.
Health insurance carriers will pay the fee directly in the case of fully insured plans. Employers who sponsored self-funded medical plans or HRAs ending sometime in 2017 must report and pay the ACA PCORI fees no later than July 31, 2018.
The IRS published a chart that describes the different types of plans subject to the fee which can be found at https://www.irs.gov/newsroom/application-of-the-patient-centered-outcomes-research-trust-fund-fee-to-common-types-of-health-coverage-or-arrangements. General summary information regarding PCORI fees can be found at https://www.irs.gov/newsroom/patient-centered-outcomes-research-institute-fee.
Amount of Fee
Payment amounts due in 2018 differ based on the employer’s plan year.
- $2.26 per covered life for plan years ending in January – September 2017.
- $2.39 per covered life for plan years ending in October – December 2017.
Calculating the Average Covered Lives
Self-funded plans may use one of three methods to determine the average number of covered lives. Plan sponsors must stick with one method for the entire plan year but are allowed to change from year to year.
1. Actual Count Method – Calculate the lives covered for each day of the plan year and divide by the number of days in the plan year.
2. Snapshot Method – Add the 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 divide the total by the number of dates on which a count was made. There are two methods for counting family members:
(a) Count the actual lives covered on the designated date; or
(b) Count the participants with self-only coverage on the designated date, plus the participants with coverage other than self-only coverage on the designated date multiplied by 2.35.
3. Form 5500 Method – Use the participants actually reported on the Form 5500 for the plan year (this method may be used only if the Form 5500 is filed no later than the due date for the fee imposed for that plan year). Total number of lives is determined by adding the participant counts at the beginning and the end of the plan year. Note—if a plan offers only single coverage, the final result is divided by 2.
Remember if your HRA has a different plan year than your medical plan or you are a fully insured with an HRA you do have to pay the PCORI fee. The PCORI fee is going away as it stands today. The final plan year for the PCORI is 2019 and the last filing will be July, 2020.
For Questions or assistance with PCORI filing contact:
Shannon Hansen, VP
Benefit Services & Compliance Director