PCORI (Patient-Centered Outcomes Research Institute) was created by ACA (Affordable Care Act) to assist patients & their caretakers to make informed decisions about total healthcare. A part of the funding for PCORI is charged from health plans and the information is designed to help employees understand the upcoming payment obligations.
The fee was originally set to expire for plans ending after October 1, 2019, and was extended for more than 10 years. This article is highlighting the PCORI Fees due data on August 2, 2021, and the benefits of PCORI.
The PCORI fee was slated to expire at the end of this year, but the Trump Administration ensured the signing of the Further Consolidated Appropriations Act of 2020. Depending upon the end date of the self-funded insurance plans, insurers & employers will continue to be responsible for paying the fees until 2029 or 2030. Make most of the opportunity to file & remit the payment for the PCORI fee within August 2nd, 2021. The adjusted fee amount for the year & the transition relief has been announced in IRS issued notice 2020-84.
The employers with self-funded health plans need to use the 2nd Quarter Form 720 to file & pay the PCOR fees. It needs to be prepared by the accountant or the employer and not by third-party administrators or the USI. Get all the details related to PCORI fees & the payment here and make an informed judgment related to the tax filings.
Overview of the PCORI Fee
The PCORI (Patient-Centered Outcomes Research Institute) fee is imposed by ACA on the health insurance plan sponsors & issuers. The fee gets calculated based on the number of heads covered under the insurance policy or plan. It is reported & paid using Quarterly Federal Excise Tax Returns (ISR Form 720). The PCORI due date is August 2, 2021, for the plan years ending in 2020. The instructions for filing form 720 by IRS include the information on reporting & proper payment of the fees.
The PCORI fee is also called PCOR fees or CER (Comparative Effectiveness Research) fees. Originally, the feel was applied to the policy or plan ending on or after October 1, 2021, and before October 1, 2019. But, it was then extended through the 2029 fiscal year!
The purpose of the funding is to empower research activities that can assist patients & the people taking their care with help of informed decisions about healthcare choices. It also focuses on the sharing of results with the public and provides them all the right information related to self-insured health care employer plans or sponsors. The plan also includes HRAs & health FSAs that are not qualifying for the necessary benefits. With the expected termination of the PCORI free this year, the issuers & planned sponsors might not have anticipated the need to identify the number of covered lives for the plan ending on or after October 1, 2019.
The notice issued by IRS ensures that the sponsors and issuers may use any alternate calculation method for the year, as long as it is applied consistently for the duration. Sponsors & issuers can use Part II, Number 133 of Form 720 to report the average lives covered under the plan separately for the health policies & self-insured plans. The total fees are calculated by combining the specified health insurance plans to the total tax owed.
No need to file Form 720 for the 1st, 3rd, or 4th quarters of the year if the issuer or plan sponsor files the Form 720 only to report the PCORI fee. Make the correct entry for the PCORI tax if the issuers or plan sponsors are filing Form 720 to report the tax liabilities for different quarters of the year.
When is the PCORI Fee Due?
The PCORI (Patient-Centered Outcomes Research Institute) is a non-profit organization that is assisting in research work related to the effectiveness of medical treatments. It is funded by health insurance carriers and thus impacts the self-funded plan sponsors. They are meant to file a return & remit a fee based on the number of plans participants use based on varied calculation methods.
The annual PCORI fees need to be paid & reported by August 2nd, 2021 by all self-insured employer health plans. It is a quarterly return and needs to be filed only once a year & in the 2nd quarter. The amount of fees paid per covered member will vary depending on the 2020 year-end plans. The fee is $2.54 per covered life for plans ending on or after October 1. 2019, and before October 1, 2020. For policy or plans ending on or after October 1, 2020, and before October 1, 2021, the IRS announced the adjusted applicable amount as $2.66.
In case of errors in filed Form of 720, the final regulations are not addressing the ways to amend or correct it. Although, it needs to be noted that the late filing of Form 720 or late payment of the fees could be abated for health plan sponsors with legitimate causes. Form 720x is not specifically identifying or referring to the PCORI fees and there is an available place to include the adjustments or explanations.
Different Calculating Methods to Determine PCORI Fee for 2021
The applicable fees can be determined by using some of the IRS-recommended PCORI calculation methods. After selecting the relevant method, it needs to be applied consistently for the duration of the plan year. Here are the calculating methods –
Actual Count Method
It is done by determining the average count of lives by adding the number of lives covered for each day of the plan & then dividing it with the total number of plan year days.
Determine the average covered lives by using the same day or days each month of the quarter. The days in the quarter should be within 3 days of the corresponding quarter.
Snapshot Actual Method
It is the count of lives covered for each of the planned years and getting it divided by the used number of days. It is accepted to count one life per employee for the stand-alone HRA plans or FSAs.
Snapshot Factor Method
It is the number of participants with self-only coverage plus 2.54 or 2.66 times the total count of participants with other than self-only coverage on the selected dates of each quarter.
It is the method required for an employee to use the number of covered lives for the recent plan year calculated based on ‘Annual Return/Report of Employee Benefit Plan’ filed with the ‘Department of Labor (Form 5500)’ for the last time period.
Make sure that the self-insured employers are filing the PCORI fees by Monday, August 2, 2021, for further assistance in the research work. The employer is solely responsible for paying in PCORI fee and thus rest assured of getting all the federal level benefits out of it! In case of any difficulty in understanding the filing of the form, reach out to experts for instant filing of Form 720.