Last month, Treasury released proposed regulations regarding fees for Patient-Centered Outcomes Research (PCOR) and the Patient-Centered Outcomes Research Institute (PCORI). As you may recall, the Affordable Care Act established a new Institute to study patient-centered outcomes, funded by a PCOR fee. This fee must be reported on Form 720 annually for seven years, beginning with the plan year ending on or after October 1, 2012. The fee is due by July 31 of the calendar year following the last day of each plan year. The new regulations describe what plans must pay the fee and how plans should calculate the fee. The PCOR fees are considered excise taxes, which accounts for the use of Form 720. The IRS is expected to revise From 720 and the accompanying instructions to reflect the PCOR fee.
The PCOR fee applies to any accident or group health policy, unless specifically excluded. Excluded plans include HIPAA-excepted benefits, health coverage for employees outside the United States, most HSAs, and most EAPs and wellness programs if they do not provide significant benefits in the nature of medical care or treatment. HRAs and retiree-only plans are generally included.
The PCOR fee for the first year is $1 multiplied by the average number of covered individuals. For the second through seventh years, the fee rises to $2 multiplied by the average number of covered participants.
Plans have several methods available to calculate the average number of covered individuals. For the first year, the regulations permit the plan to use any reasonable method for this calculation. For all other years, plans may pick one of the following methods:
- Actual count: The plan would count the total covered individuals for each day of the year and divide that number by the total number of days in the plan year.
- Snapshot Method: The plan would count the number of covered employees on one date each quarter of the plan year and divide by four.
- Snapshot Factor Method: The plan would count the number of covered employees plus 2.35, multiplied by the number of covered employees that also have at least one covered family member, and divide that number by four.
- Form 5500 Method: For plans that offer single coverage, the plan would add the number of participants recorded on Form 5500 for the start and end of the plan year and divide by two. If the plan offers coverage beyond self-only, then the plan would make the same calculation, but would not divide the number of participants by two.
Multiple self-insured plans maintained by the same plan sponsor with the same plan year are subject to a single fee. It appears this is intended to ensure that plan sponsors do not have to pay the fee twice for the same individual.
Today’s post was contributed by Maureen M. Maly.
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