ACA-required fee affects all plan sponsors; the self-insured must file
One provision of the Affordable Care Act (ACA) of 2010 required the establishment of a not-for-profit organization called the Patient-Centered Outcomes Research Institute (PCORI). PCORI funding is legislated to come, in-part, from a fee on insurance issuers, including sponsors of self-insured plans. The imposed fee begins in 2012 and phases out in 2019.
The fee is being treated like an excise tax by the IRS, which will require insurance issuers, including sponsors of self-insured plans, to file Form 720 by July 31 (for plan years ending between October 31, 2012 and December 31, 2012). Plan years ending in 2013 will be required to file in 2014.
For sponsors of fully-insured plans, the issuer – your insurance company – is responsible for filing Form 720 and paying the required PCORI fee on your behalf. No filing action is needed on your part. However, it’s expected that your insurer will roll the PCORI fee into your premium.
While the fee requirement was included in the legislation that passed in March, 2010, the IRS only recently published its direction on calculating the fee.
Calculating the Fee
Your PCORI fee is equal to the average number of covered lives for the policy year, times the applicable dollar amount, as seen below.
• For policy years ending on or after Oct. 1, 2012, and before Oct. 1, 2013 – the applicable dollar amount is $1.
• For policy years ending on or after Oct. 1, 2013, and before Oct. 1, 2014 – the applicable dollar amount is $2.
• For policy years ending in any fiscal year beginning on or after Oct. 1, 2014 – the applicable dollar amount is indexed for medical inflation.
Importance of the institute you’re funding
The not-for-profit PCORI was established to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing comparative clinical effectiveness research.
Part of PCORI’s mission is to improve healthcare delivery and outcomes, by producing and promoting high integrity, evidence-based information that comes from research. This is aimed straight at the heart of healthcare costs. Ultimately, the institute is involved in advancing clinical effectiveness so that dollars aren’t wasted on decisions that result in poor outcomes. Theoretically, every health insurance plan sponsor will benefit.
The Affordable Care Act provides that the institute will not be an agency or establishment of the United States Government, and will be funded by a Patient-Centered Outcomes Research Trust Fund. The trust fund, in turn, is to be financed in part by the fees paid by issuers of health insurance policies and sponsors of self-insured health plans.
Sponsors of self-insured plans, CSH is ready to help you with the necessary filing. Please contact us to learn more.
For more information contact Bill Edwards at [email protected].
