In just over a month’s time, applicable health plan sponsors must submit Form 720 and accompanying PCORI fees to the IRS.

Due Aug. 1, 2016, the Affordable Care Act-established PCORI fees help fund the Patient-Centered Outcomes Research Institute, a nonprofit, nongovernmental organization which researches the best health-care options for patients.

The temporary annual PCORI fee is based on a plan’s average number of covered lives multiplied by the dollar amount that applies to a plan year.

For policy years and plan years ending on or after Oct. 1, 2015, and before Oct. 1, 2016, the fee is $2.17 per covered life. For policy years and plan years ending on or after Oct. 1, 2014, and before Sept. 30, 2015, the fee was $2.08 per covered life.

Under final regulations, third-party reporting or payment of PCORI fees is not permitted.  While plan sponsors must submit their own reporting and payment based on covered lives, they are given some choices when it comes to determining how to count covered lives.

Plan sponsors and issuers can measure covered lives using either the Actual Count Method or the Snapshot Method.  Under the Actual Count Method, the reporter would add the total number of lives covered for each day of the policy year and divide by the number of days in the policy year. Under the snapshot method, the reporter would count the number of lives covered on one day in each quarter of the policy year and divide that total by the number of dates on which a count was made.

Alternately, plan sponsors can also choose to use the Form 5500 Method and issuers can choose to use the Member Months Method or State Form Method.

Applicable self-insured health plans and specified health insurance policies are subject to PCORI reporting and fees if they offer: 

  • Accident and health coverage or major medical insurance coverage;
  • Retiree-only health or major medical coverage;
  • Health or major medical coverage under multiple policies or plans;
  • COBRA coverage;
  • Health Reimbursement Arrangements (unless it qualifies as an excepted benefit);
  • Flexible Spending Arrangements (unless it qualifies as an excepted benefit); and
  • State & local government health or major medical plans for employees and/or retirees.

Under IRS Notice 2015-43, plan sponsors do not have to pay the PCORI fee for individuals primarily working outside the U.S. or foreign employees working in the U.S. for less than six months. Additionally, plan sponsors of military health plans, certain Indian tribal government health plans, Health Savings Arrangements, Archer Medical Savings Accounts, employee assistance programs, disability income coverage and more are not subject to PCORI reporting and fees.

For plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019, PCORI fees are due by July 31 of the year following the end of the plan or policy year.  The deadline is extended to the following business day when the deadline falls on a weekend, as it does this year.

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