Are You Subject to the New PCORI Fees?

July 17, 2013

The Patient Protection and Affordable Care Act (PPACA) established the nonprofit Patient-Centered Outcomes Research Institute (PCORI) to promote research that will yield evidence on the effectiveness, benefits and harms of different medical treatment options.

To fund the PCORI, the PPACA imposes a fee for each policy or plan year ending on or after October 1, 2012, and before October 1, 2019. The fee applies to health insurers and employers who sponsor self-insured health plans, with the first one being due on July 31, 2013. Subsequently, the PCORI fee will be due no later than July 31 following the last day of the plan year.

The fee will be $1 per plan participant for the first plan year ending after September 30, 2012, and $2 per participant in succeeding years. For policy or plan years ending on or after October 1, 2014, the fee will be increased based on increases in the projected per capita amount of national health expenditures.

These fees are to be reported annually on Form 720, quarterly Federal Excise Tax return. The IRS has recently issued the new Form 720 and related instructions to encompass this fee.

If you are the sponsor of a self-insured plan, health reimbursement arrangement (HRA), or certain health flexible spending arrangement (FSA), you may be required to file the Form 720 and pay the PCORI fee. For plan years ending on dates on or between October 1, 2012 and December 31, 2012, the first payment is due by July 31, 2013.

Plans subject to the PCORI fee include:

  • Medical plans
  • Prescription drug plans
  • Self-insured dental or vision plans, if provided without a separate election or premium charges
  • Health reimbursement arrangements (HRAs)
  • Retiree-only health plans

Plans exempt from the PCORI fee:

  • Separate insured dental and vision plans
  • Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions
  • Health savings accounts (HSAs)
  • Most flexible spending accounts (FSAs)
  • Employee assistance programs (EAPs), wellness programs and disease management programs that do not provide “significant benefits in the nature of medical care or treatment”

There are numerous complexities to this provision of PPACA, as well as multiple methods for determining the number of covered lives on which the fee must be paid. Please contact JPS if you have questions about your compliance responsibilities relating to the PCORI fee.