The PCORTF receives its funding from, first, the general fund of the Treasury, and, secondly, a fee assessed on: (1) issuers of specified health insurance policies and (2) plan sponsors of applicable self-insured health plans. The Patient-Centered Outcomes Research Institute has estimated that it will receive approximately $3.5 billion from the PCORTF through October 1, 2019 when its authorization expires.
The PCORTF fee will be assessed against “specified health insurance policies” for plan years ending after September 30, 2012 through October 1, 2019. The IRS has announced that it will collect the PCORTF fee for the first time this summer on July 31, 2013. That means insurance providers and certain plan sponsors must prepare for reporting and paying the fee.
What is an “applicable self-insured health plan?”
An “applicable self-insured health plan” is any plan for providing accident or health coverage if any portion of the plan's coverage is provided other than through an insurance policy, and the plan is established or maintained by one or more of the following: by one or more employers for the benefit of their employees or former employees; by one or more employee organizations for the benefit of their members or former members; jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees; by a Code Sec. 501(c)(9) voluntary employees’ beneficiary association (VEBA); by any Code Sec. 501(c)(6) organization; or, in the case of a plan not described in any of the other categories, by a multiple employer welfare arrangement, a rural electric cooperative, or a rural telephone cooperative association.
Fees are required for all group health plans including HRAs and some health FSAs unless they consist solely of employee contributions or excepted benefits such as plans that only cover vision or dental expenses. Health FSAs are only required to pay the fee if 1) the employer does not offer another group health plan and 2) there are employer contributions to the plan with maximum reimbursement greater than two times an employee's salary reduction election (or if greater, employee's salary reduction election plus $500).
How much is the fee?
The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year. For policy and plan years ending after September 30, 2012, and before October 1, 2013, the applicable dollar amount is $1.
For policy and plan years ending after September 30, 2013, and before October 1, 2014, the applicable dollar amount is $2. For policy and plan years beginning on or after October 1, 2014, and before October 1, 2019, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.
For self-insured plans, the plan sponsor will be responsible to pay the fees. In many cases, the plan sponsor will be the employer. For fully-insured plans, the insurance carrier will need to pay the fees.
How do I report the fee?
Issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans must annually file Form 720, Quarterly Federal Excise Tax Return, to report and pay the PCORI fee. Form 720 is due on July 31 of the year following the last day of the policy year or plan year. Payment is due at the time the Form 720 is due. As noted above, the initial filing and fee will be due on July 31, 2013.
If you have any questions regarding the PCORTF, the related fee, and how it might affect your business, please contact our offices. We will be happy to help you determine your filing responsibilities, if any, and prepare Form 720 if needed.
Rager, Lehman & Houck, P.C.