- Posted by Scott Wham
- On July 7, 2015
The Affordable Care Act (ACA) requires health insurance issuers and sponsors of self-insured health plans to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). The fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return).
As such, health insurance issuers and sponsors of self-insured health plans are required to pay fees to help finance the Institute’s research. These fees are commonly referred to as PCORI fees. Both fully-insured and self-insured plans are subject to the PCORI fees. For self insured plans, the plan sponsor is responsible for the fee. For insured plans, the insurers are responsible for the fee. Most insurers will build the fee into their current pricing model.
PCORI fees will be due by July 31, 2015, for plan years ending in 2014. IRS instructions for filing Form 720, which were revised in January 2015, include information on reporting and paying the PCORI fees.
Overview of the PCORI Fee
The PCORI fees apply for plan years ending on or after Oct. 1, 2012, but do not apply for plan years ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years. Issuers and plan sponsors will be required to pay the PCORI fees annually on IRS Form 720 by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the deadline for filing Form 720 is July 31, 2015, for plan years ending in 2014.
Reporting the PCORI Fee on Form 720
Issuers and plan sponsors will file Form 720 annually to report and pay the PCORI fee, no later than July 31 of the calendar year following the policy or plan year to which the fee applies. The PCORI fee applies separately to “specified health insurance policies” and “applicable self insured health plans,” and is based on the average number of lives covered under the plan or policy.
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:
- $1 for plan years ending before Oct. 1, 2013 (that is, 2012 for calendar year plans).
- $2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014.
- $2.08 for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015 (see Notice 201456).
- For plan years ending on or after Oct. 1, 2015, the rate will increase for inflation.
The fees for specified health insurance policies and applicable selfinsured health plans are then combined to equal the total tax owed. To review the IRS fee schedule relative to plan year, please click here.
SPECIAL RULES FOR HRAs and FSAs
If an employer sponsors a fullyinsured medical plan and a self-funded plan such as a Health Reimbursement Account (HRA), a Medical Expense Reimbursement Account (MERP), or, in rare instances, a Health Flexible Spending Account (FSA), the employer may be required to pay separate PCORI fees for the selfinsured aspect of the fullyinsured plan. Note, however, that to calculate the PCORI fee for HRA accounts, only covered employees are counted, not dependents and spouses.
To read more about the PCORI fee, please click here.