With the passage of the Affordable Care Act there are a number of new fees employers face on their health insurance. More often referred to as taxes, these fees set up additional funding for the law. One of these is the PCORI fee.
As an employer, you may have noticed a charge on your insurance bill labeled as PCORI. Some carriers are choosing to list the fees out as a line item in the bill while others have built the fee into the overall rate. If your group plan is self-funded you are required to pay this fee on your own.
PCORI stands for Patient-Centered Outcomes Research Institute. Fees assessed to employers will be placed in the PCORI Trust Fund for research intended to evaluate and compare the health outcomes, clinical effectiveness, benefits and risks of various medical treatments. Critics of the PCORI fee often label it as the “death panel tax.”
Each plan’s PCORI fee is calculated based on the average number of lives covered by the health insurance issuer or employer sponsoring the individual or group health plan during a plan year. The IRS allows some flexibility in the formula selected by the issuer or plan sponsor when counting covered lives, as long as it is applied consistently.
The fee is equal to the average number of covered lives for the plan year times the applicable dollar amount:
- $1 per covered life for plan years ending after September 2012
- $2 per covered life for plan years ending after October 2013
- For plan years ending after September 2014 and beyond, the fee will be the amount of the previous year plus a percentage increase based on an inflation factor
PCORI fees must be reported and paid by issuers and plan sponsors once per year, and reported on the IRS Form 720. Reports and fee payments are due by July 31, of the year following the end of a plan year. If your group is self-funded, payment must be made directly by the group. In the case of fully insured groups, the fees are collected and paid by the insurance carrier.
As the law continues to go into effect there are a number of other fees and taxes that are scheduled to begin. Understanding how this impacts your bottom line and making sure that fees are paid on time is important to a business. At AUI, our agents understand the fees associated with the Affordable Care Act. If you have any questions about how PCORI may impact your group or if you want to know more about how AUI can help your organization find affordable insurance, please contact us.