The Comparative Effectiveness Research Fee is now known as the Patient-Centered Outcomes Research Institute (PCORI) Fee. The Patient Protection and Affordable Care Act (the Act) imposes a new Patient-Centered Outcomes Research Institute (PCORI) fee, formerly the comparative effectiveness research fee, on plan sponsors and issuers of individual and group policies. The first year of the fee is $1 per covered life per year, the second year the fee adjusts to $2 per covered life and then it’s indexed to national health expenditures thereafter until it ends in 2019.
Click here to download this bulleting regarding the timely payment of the fees.
Purpose of the Fee
The assessed fees are to be contributed to the Patient-Centered Outcomes Research Trust Fund (PDF) that will fund comparative effectiveness research. The research will evaluate and compare health outcomes and the clinical effectiveness, risks, and benefits of two or more medical treatments and/or services.
Who Pays the Fee
Under the IRS final rule, issuers and plan sponsors are responsible for paying the fee, which is treated like an excise tax by the IRS. A federal excise tax return (Form 720) reporting liability for the fee must be filed by July 31 of the calendar year immediately following the last day of the plan year.
As the issuer of specified health insurance policies, a fully insured issuer is responsible for filing Form 720 and paying the required PCORI fee in the case of fully insured coverage. The nominal PCORI fee will be rolled into the premium. As the plan sponsor, self-funded customers must complete Form 720 and pay the fee directly to the IRS. (Self-funded customers with questions about the filing of excise tax returns should consult with their tax advisor.)
The PCORI Fee and Health FSAs and HRAs
- Under the PCORI statutory structure, both the fully insured medical policy and the self-funded HRA are subject to the PCORI Fee. As the issuer of specified health insurance policies, your issueris responsible for paying the PCORI Fee in the case of fully insured coverage. As the sponsor of a self-funded HRA, our employer-customer (or other plan sponsor) is responsible for paying the PCORI fee on behalf of the self-funded HRA. This means that the PCORI fee is paid twice in this situation: once by the health insurance issuer and once by the self-funded plan sponsor. This issue has been referred to as the “double counting issue.” Sponsors of self-funded HRAs (that also have a fully insured medical policy, but no other self-funded medical coverage) count only the participant’s accounts, so they are treated as a single life (the plan sponsor is not required to count spouses or other dependents). The health insurance issuer will have a different membership count for the fully insured plan than the employer/sponsor who submits the fee for the self-funded HRA.
- The IRS provides relief from “double counting” when the major medical plan and the HRA are both self-funded and share the same plan year. In that case, both self-funded plans are treated as one self-funded arrangement and the PCORI Fee is only paid once. This rule is known as the “Multiple Self-Insured Arrangements Maintained by the Same Plan Sponsor” rule. It applies anytime a plan sponsor has more than one self-funded plan with the same plan year. Relief under this rule is also available to self-funded plan sponsors with self-funded pharmacy benefit plans or other plans subject to PCORI.
- If a plan sponsor only maintains an FSA or HRA, and does not offer other self-funded medical coverage, then the plan sponsor may treat each participant’s account as covering a single life. (The plan sponsor is not required to count spouses or other dependents.)
More FAQ on PCORI: