As part of healthcare reform, the Affordable Care Act established a private, nonprofit corporation called the Patient-Centered Outcomes Research Institute ("PCORI"). PCORI is intended to assist patients, clinicians, purchasers and policy-makers in making informed health decisions by conducting and publicizing comparative clinical research findings. PCORI's website can be viewed at www.pcori.org.

Of course, nothing is free, and PCORI is no exception to this rule. To fund the corporation, Congress established the Patient-Centered Outcomes Research Trust Fund. This trust fund is financed, in part, by fees to be paid by issuers of health insurance policies and sponsors of self-insured health plans. The first of those fees will be due July 31, 2013.

The U.S. Department of the Treasury recently published final regulations implementing the PCORI fees. Important takeways for plan sponsors include the following:

  • The fee applies to medical plans, prescription drug plans, self-insured dental or vision plans (if provided without a separate election or premium charge), health reimbursement arrangements and retiree-only health plans
  • The fee applies to all plan years ending on or after October 1, 2012, and before October 1, 2019
  • Health insurance issuers and plan sponsors of self-funded plans must report and pay the PCORI fee for a plan year no later than July 31 of the year following the last year of the plan year. The PCORI fee is reported and paid on Form 720, "Quarterly Federal Excise Tax Return"
  • The fee is $2 ($1 in the case of plan years ending before October 1, 2013) multiplied by the average number of lives covered under the plan. For plan years ending on or after October 1, 2014, the fee is increased based on increases in the per capita amount of national healthcare expenditures
  • For the first year the fee is in effect, a plan sponsor may use any reasonable method to determine the average number of covered lives. Thereafter, the plan sponsor must use one of three methods: (i) the actual count method, (ii) the snapshot method or (iii) the Form 5500 method
  • COBRA coverage must be taken into account in determining the fee
  • Two or more arrangements established or maintained by the same plan sponsor that provide health coverage (other than an insurance policy) that that have the same plan year may be treated as a single self-insured plan in determining the fee. Note, however, that an employer that sponsors a fully insured health plan paired with a self-funded health reimbursement arrangement generally will be required to pay the fee twice on the same lives

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