The IRS – Internal Revenue Services has issued the final rule on comparative evidence PCORI fees. The rule applies to both fully insured and self-insured health plans ending on or after October 1, 2012 and before October 1, 2019. Because PCORI fees are payable by insurance carriers (fully insured plans) and employer/plan sponsors (self-insured plans), they are not a permissible plan expense and cannot be passed on directly to participants. In another development, the PCORI fee is an “ordinary and necessary business expense paid or incurred in carrying on a trade or business” and as result is tax-deductible, the IRS said in memorandum.
What is PCORI?
The Patient Centered Outcomes Research Institute (PCORI) is an organization established by the Patient Protection and Affordable Care Act (PPACA) aimed at giving patients a better understanding of the prevention, treatment, and care options available, and the science that supports those options.
Who Is Subject To Pay?
To fund the PCORI, the PPACA imposes a fee on health insurers and employers who sponsor self-insured health plans, for each policy or plan year ending on or after Oct 1, 2012 and before Oct 1, 2019. The first fee payment is due July 31, 2013. Subsequently, the PCORI fee will be due no later than July 31 following the last day of the plan year.
The fee will be $1 per plan participant for the first plan year ending after Sept. 30, 2012, and $2 per participant in succeeding years. For policy or plan years ending on or after Oct. 1, 2014, the fee will be increased based on increases in the projected per capita amount of national health expenditures.
What Plans Are Subject to PCORI Fees?
Generally, any plan established or maintained by one or more employers for their employees that provides accident or health coverage, any portion of which is provided other than through an insurance policy, is a self-insured plan subject to PCORI fees.
- Medical plans
Prescription Drug Plans
Self-insured dental or vision plans, if provided without a separate election or premium charge
Health reimbursement arrangements (HRAs)
Retiree-only health plans (even though some are exempt from other PPACA mandates)
PCORI fees do not apply to excepted benefits:
- Separately insured dental or vision plans
Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions
Expatriate coverage provided primarily for employees who work and reside outside of the U.S.
Health savings accounts (HSAs)
Most flexible spending accounts (FSAs)
Employee assistance programs (EAPs), wellness programs and disease management programs that do not provide “significant benefits in the nature of medical care or treatment.”
Form 720 – Paying the PCORI Fees
The PCORI fee for each plan year is due by July 31 of the calendar year immediately following the last day of the plan year. This means that if a employer sponsors a plan with a plan year ending between October 1, 2012, and December 31, 2012, the first PCORI fee is due on July 31, 2013. Employers must pay the PCORI fee by filing IRS Form 720. Although this form is for quarterly federal excise tax returns, employers need to report and pay PCORI fees only annually.
For additional information on this topic, please visit the IRS site at www.irs.gov