Self-funded plan sponsors: Don’t miss the July deadline to file and remit payment for the Patient-Centered Outcomes Research (PCORI) fee.
What is PCORI?
The PCORI is a non-profit institute that was created under the Affordable Care Act (ACA) to research the effectiveness of medical treatments. PCORI impacts self-funded plan sponsors and is funded by health insurance carriers and health plan sponsors who file a return and remit a fee based on the number of plan participants using one of four approved calculation methods.
When is the PCORI fee due?
All self-insured employer health plans must pay the annual PCORI and reporting fee by July 31, following the last day of the plan year. The final PCORI payment for sponsors of 2018 calendar-year plans is due by July 31, 2019. The final PCORI fee for plan years ending from Jan. 1, 2019 to Sept. 30, 2019, will be due by July 31, 2020. The PCORI fee is filed using IRS Form 720 (Quarterly Federal Excise Tax Return). Although Form 720 is a quarterly return, self-insured plan sponsors use this form to file PCORI fees due in the second quarter. Health insurers file and remit the PCORI fee for fully insured plans. The amount of the fee paid per covered member will vary depending on when the plan year ends.
As a reminder, Health Reimbursement Accounts (HRAs) are subject to the PCORI fee, however, Health Savings Accounts (HSAs) and most Flexible Spending Accounts (FSAs) are not. Generally, a separate fee applies for lives covered by each health insurance policy or self-funded plan. However, if an employer has multiple self-insured health plans with the same plan sponsor and the same plan year, such as a medical plan and an HRA, employers may treat those plans as a single applicable self-insured plan.
How to determine your PCORI fee
1. Actual Count Method – A plan sponsor may determine the average number of lives covered by adding the totals of lives covered for each day of the plan year and dividing that total by the total number of plan year days.
2. Snapshot Method – Using the same day or days(s) each month of every quarter to determine the average covered lives. Dates in each quarter must be within three days of the corresponding quarters.
- Snapshot Actual Method – Total number of lives covered (employees and their covered family members or only employees if HRA or FSA) on each selected date for each quarter of plan year, divided by the number of dates used.
- Snapshot Factor Method – Number of participants with self-only coverage plus 2.35 times the number of participants with other than self-only coverage on each selected date for each quarter of plan year, divided by the number of dates used. (Do not use this method for HRA or FSA plans.)
3. Form 5500 – This method requires an employer to use the number of covered lives for the most current plan year calculated based upon the “Annual Return/Report of Employee Benefit Plan” filed with the Department of Labor (Form 5500) for the last applicable time period. For purposes of this calculation method, an employer will use the sum of the total number of lives covered for the plan year for both self-only coverage and all other coverage starting at the beginning and the end of the plan year, as reported on the Form 5500. For employers who offer coverage only to individuals, an employer can use the average of covered lives counts as report on Form 5500 at the beginning and end of plan year.
Reminder to Health e(fx) clients: Your Health e(fx) system provides tools for calculating the number of covered lives and the PCORI fee using all methods described above to remit before July 31. If your plan year ends before October 1, 2019, or you need assistance running the report, please contact your Health e(fx) Account Manager.
July 11, 2019